Volkswagen Group in February announced it was considering spinning off the Porsche AG sports car business to help raise funds for investment in the key areas of electric vehicles, self-driving technology, and software development.
VW Group's biggest shareholder with a 31.4% stake, the Porsche SE holding company, on Tuesday reaffirmed its support for the deal and plan to acquire a stake in Porsche AG after it goes public, via an initial public offering.
The deal would see shares in Porsche AG divided into 50% ordinary shares and 50% preference shares. Ordinary shares typically come with more voting rights than preference shares. Just 25% of the preference shares would be available via the IPO, while Porsche SE would acquire 25% plus one share of the ordinary shares, giving it a 12.5% stake in the sports car business at the conclusion.
Previously it was thought that Porsche SE, which is controlled by the Porsche and Piech families, would sell some of its shares in VW Group in order to purchase shares in Porsche AG. However, Johannes Lattwein, Porsche SE's board member for finance and IT, said in a statement that the Porsche AG stake would become a second core investment alongside the company's existing core investment in VW Group.
“With the stake in Porsche AG, Porsche SE would acquire a second core investment and thereby pushing forward our investment strategy,” he said.
Considering that the IPO is expected to value Porsche SE at over $80 billion, Porsche SE will need significant funds to purchase the stake in Porsche AG. Possibilities for financing the deal include taking on debt, as well as the payment of a special dividend by VW Group to its shareholders using proceeds from the Porsche AG IPO. The dividend will be generated from 49% of the total gross proceeds of the placement of the preferred shares and the sale of the ordinary shares.
We should note that a final decision on the IPO is yet to be made, and that market conditions, especially with the Ukraine situation and interest rates starting to rise, could easily change things.