Porsche wants bigger stake in VW

FRANKFURT, Germany (Reuters) -- German carmaker Porsche wants to raise its stake in Volkswagen to just below 30 percent, it said on Wednesday after posting a 70 percent rise in pretax profit in the fiscal year to end-July.

Porsche also proposed boosting its financial firepower by creating up to 8.75 million new shares in authorized capital -- half of its existing stock -- for use over the next five years, which at current prices would be worth nearly 8 billion euros ($10.2 billion).

It upped its payout to shareholders by 80 percent and said its supervisory board extended the contract for its 54-year-old Chief Executive Wendelin Wiedeking by a further five years.

The Stuttgart-based company aims to eventually hold 29.9 percent in Europe's largest carmaker, just shy of the 30 percent threshold at which it would have to launch a full tender for Volkswagen, a move that it has so far ruled out.

Porsche, controlled by the family of VW Chairman Ferdinand Piech, is already VW's largest shareholder. Increasing its stake would expand its influence should a law limiting voting rights in VW to 20 percent be overturned next year as expected.

Porsche exercised on Monday an option to raise its VW stake to 25.1 percent from 21.3 percent, and bought more shares to bring its holding to 27.4 percent.

Volkswagen stock surged as much as 8.4 percent to an eight-year high while Porsche slumped as much as 4.5 percent.

While some bullish Volkswagen investors have been speculating on a full Porsche bid, many analysts believe the sports car maker aims to effectively take over VW without paying a control premium to shareholders.

"I don't believe that Porsche wants to acquire VW through a capital hike, but I do believe that Porsche will likely nominate the next chairman of the supervisory board," Commerzbank analyst Albrecht Denninghoff said.

A London-based analyst voiced skepticism that Porsche would try to buy all of Volkswagen. "Anything is possible (but) I don't see the rationale behind it."

Porsche -- if it wanted to -- could use debt to fund buying the rest of VW, whose market value is nearly 30 billion euros.

Porsche said the authorized capital could be used for an acquisition but no concrete transaction was planned at present.

A spokesman for the company said that no matter how many new shares were issued over the next five years, the shareholder structure would always remain 50 percent preferred stock which could be traded on the market and 50 percent common shares held by the controlling Porsche and Piech families.

Porsche's fiscal year earnings to end-July exceeded even the most optimistic expectation of the 19 analysts polled by Reuters and its total dividend payout also surpassed estimates.

High demand for the popular 911 series as well as its all new Cayman S mid-engine coupes helped lift earnings to a record 2.11 billion euros before tax, easily beating the average of 1.58 billion from a Reuters poll of 18 analysts.

Porsche said the profit surge came in part from one-off items, including selling its CTS car roof unit, profit from its VW investment, and earnings from hedging linked to the purchase of VW shares which "alone made a contribution to profit easily of the order of triple-digit millions."

Net profit of 1.39 billion also exceeded expectations in the poll of 1.06 billion.
It proposed hiking its dividend to 6 euros per preferred share plus an additional one-time payout of 3 euros per share, versus a Reuters poll estimate of 5.50 euros.
Full financial results are due on Dec. 6.

Late in September, Porsche reported revenue growth outpaced the rise in volumes last year, increasing 10.6 percent to 7.27 billion euros as it sold 96,794 vehicles -- up 9.5 percent.

Porsche has said it was confident it can at least achieve the same record level in unit sales in the 2006/07 fiscal year thanks in part to an expansion into new markets, and has forecast a "major boost in growth" as of 2009, when its new Panamera four-door sports coupe hits dealerships.

Porsche trades at 14 times estimated 2006/07 earnings, a premium to the industry due to the strong brand name, its management track record, continuous earnings growth and a perceived invulnerability to cyclical downturns that make some believe investors treat it as a luxury stock and not a carmaker.

The high valuation comes despite poor transparency, particularly concerning its key currency hedges, the lack of quarterly results or even monthly global car sales data, and the fact that investors can only buy shares without voting rights.