PORSCHE, THE sports-car maker that plans to merge with Volkswagen, will start a €5 billion share sale tomorrow to reduce debt.

The car maker plans to sell shares at €38 apiece to current owners, Porsche said. One existing share carries the right to subscribe to 0.75 new shares. The price is 32 per cent lower than the preferred stock’s close last Friday of €56.22.

Porsche, which will use the proceeds to cut debt to €1.5 billion, said last week the share-sale timetable still stands amid volatile financial markets following the Japanese earthquake. Porsche and VW agreed to combine in 2009 after the maker of the 911 sports car racked up more than €10 billion of debt in an unsuccessful attempt to gain control of VW.

“It’s not the perfect timing given how volatile the market has been in recent weeks, but they’re under pressure to get this done,” said Jürgen Pieper, a Frankfurt-based analyst at Bankhaus Metzler who recommends buying the shares. “They’re averting the much greater damage that would occur if the merger were pushed back for months.”

Porsche’s preferred shares rose 6.7 per cent to €60, the most since January 26th, valuing the manufacturer at €10.5 billion. Porsche will issue as many as 131.25 million shares, evenly split between preferred and common stock, the company said. The common shares are controlled by the Porsche and Piech families. The subscription for the sale begins tomorrow and ends April 12th.

Hans Dieter Poetsch, chief financial officer at VW and Porsche, said he would have preferred a “different environment” for the stock sale. Porsche has had talks with “the bulk” of investors and expects no difficulties. – (Bloomberg)