Volkswagen’s planned Porsche float will only offer non-voting shares to the public in a move that threatens to cast a pall over what could become one of Germany’s largest listings, fetching an estimated €20 billion.
The German carmaker confirmed it had “concluded a framework agreement” that creates two share classes and mirrors the company’s own much-criticised corporate governance structure.
The deal with its largest shareholder, the investment vehicle of the Porsche-Piëch family, will involve floating just 12.5 per cent of the storied sports car brand on the open market, leaving the two companies in control.
The partial initial public offering could take place as early as October, Wolfsburg-based VW added.
Arno Antlitz, VW’s chief financial officer, called the plan a “win-win situation for all our stakeholders”, referring to VW’s powerful German works council and the company’s lead shareholders, which include the Porsche-Piëch families and the German state of Lower Saxony.
Electric vehicles
Chief executive Herbert Diess said the move would give Porsche, which accounts for roughly a quarter of VW’s annual profits and has made inroads into the electric market, greater “entrepreneurial freedom”.
The proceeds from an IPO would give VW “additional flexibility to further accelerate the transformation” to electric vehicles, he told analysts.
Under current plans, Porsche’s share capital would be split in half, creating two classes - ordinary voting shares and non-voting preference shares.
The Porsche-Piëch family’s investment vehicle would then buy just over 25 per cent of the voting shares at a 7.5 per cent premium on the flotation price, regaining a direct hold over the historic heirloom, which the family was forced to cede to VW in 2012 after a failed takeover attempt following the financial crisis.
A further 25 per cent of the non-voting preference shares will be offered to the market, and Qatar’s sovereign wealth fund, a current VW shareholder, aims to “become a strategic investor in Porsche AG’s preferred shares as a natural expansion of the existing relationship”, the company said.
Goldman Sachs advised on the structure of the transaction, Antlitz added.
Despite the narrow free float, VW looks set to raise at least €20 billion from the IPO on a valuation of about €90 billion for Porsche as a whole. This sum would eclipse some of the largest public offerings in recent years, including electric carmaker Rivian’s $12 billion Nasdaq debut in 2021.
Governance
Given its consistently high profit margins, “the appeal of owning a direct stake in Porsche almost guarantees success”, said Philippe Houchois, an auto analyst at Jefferies. “But the preliminary terms still subject to approval by VW and [Porsche SE] boards raise governance concerns.”
VW said it intended to use 49 per cent of its proceeds on a special dividend, much of which would help fund Porsche SE’s purchase of ordinary Porsche voting shares.
The company said it would also distribute a one-off €2,000 bonus to roughly 130,000 German employees, placating unions that in effect control the company’s supervisory board.
The remaining proceeds could be used to fund some of VW’s six planned battery plants, the company said. However, it reiterated that its current ambitions, which include a €52 billion investment in electric vehicles and €30 billion in software, could be funded using existing free cash flow.
VW warned the “feasibility of an IPO depends on several different parameters as well as general market conditions”, and “no final decisions” had been made. - Copyright The Financial Times Limited 2022