Though we thought the Porsche-Volkswagen merger was all but complete, there are still a few legal hurdles to overcome before the deal can be considered done.
It seems there are some tax responsibilities and pending lawsuits that could slow things down. The cases claim Porsche executives manipulated the stock market during the automaker's attempted takeover of VW. In January, a group brought suit against Porsche alleging two top executives caused the funds to lose more than $1 billion.
These difficulties may, in turn, force the VW-Porsche merger to be delayed or possibly scrapped, though a VW spokesman told Automotive News the company's plans to merge by 2011 "have not changed." Porsche remains confident too, claiming the VW prospectus spelling out terms of the merge listed every possible hurdle. The risks are "limited," said a Porsche spokesman.
VW stated in its March prospectus that compensation sought by hedge funds may "place a considerable burden on Porsche's financial resources and liquidity position and, if substantial in magnitude, could even lead to the insolvency of Porsche Automobil Holding SE."
Max Warburton, a research analyst for Bernstein Research, said the risks involved with the merger could force VW to pay for the remaining 50.1-percent stake in Porsche's sports car operations. Last year, VW took a 49.9-percent stake in the German sports car maker for $5.8 billion. Being forced to pay for the remaining stake in Porsche could require "further capital raising (for VW)," said Warburton.
Source: Automotive News (subscription required)