Breaking News : Porsche increases Volkswagen stake to 42.6 percent

BERLIN : October 26, 2008 - Automaker Porsche said Sunday it had boosted its stake in Volkswagen AG to 42.6 percent as part of its goal to take a majority hold in Europe's biggest car maker before the end of the year.


Porsche Automobil Holding SE was already Volkswagen's biggest shareholder, with just over 35 percent, and said this month that its stake had increased, without giving an exact figure.

Porsche said it wanted to announce its holding now, given the ongoing turbulence on financial markets. It also said it held an additional 31.5 percent in cash-settled options, that would give it indirect control of 74.1 percent of VW shares.

"The goal remains, as long as the financial conditions are right, to increase (the stake) to 75 percent in 2009 and clear the way for a controlling stake," the Stuttgart-based company said.

As part of that goal, Porsche said it was sticking to plans to lift its VW stake above the 50 percent mark before the year's end.

Porsche has slowly been increasing its stake in VW, which enjoys a special status in Germany under a law that allows the state of Lower Saxony, where Volkswagen is based, a blocking minority right although it holds a stake of just over 20 percent. The European Union has sought to overturn that law, which effectively protects the automaker from being taken over.

The head of Volkswagen's employee council reacted angrily to Porsche's announcement, saying that VW's bylaws stipulate that an 80 percent stake is needed to reach a controlling stake.

"Even if Porsche always disputed it, it was clear that their goal was a profit transfer and controlling stake," said Bernd Osterloh said in a statement.

[Source : Associated Press via Business Week]