Porsche IPO Could Value Carmaker as High as $81 Billion, CFO Says
CFO compares brand’s possible value to Ferrari-like multiples.
(Bloomberg) -- Porsche AG’s chief financial officer said a share sale of Volkswagen AG’s most profitable unit could unlock value to echo Ferrari NV’s successful public offering and help the sports-car maker raise money if needed.
The maker of the 911 model could easily be valued “between 60 billion and 70 billion” euros ($69.4-$81 billion), applying multiples for luxury-goods producers such as Ferrari, Lutz Meschke told reporters at Porsche’s development center outside Stuttgart at an event for the brand’s first electric car, the Taycan. A partial initial public offering would add financing flexibility as the auto industry faces “the biggest transformation ever.”
Porsche isn’t pursuing plans for a listing, a decision that would be taken at group level, the company said in a written statement Monday following the comments. At Meschke’s estimate, the market value of an independent Porsche would rival that of the entire VW group, which includes 11 other brands. Shares of the parent have lost 16 percent this year, giving it a market capitalization to 69.3 billion euros.
The comments show deliberations on the structural changes run deeper than VW has mapped out so far, and offer a rare insight into top management’s thinking. Meschke said he has pointed out the benefits of a listing during internal discussions, but declined to say to what degree his view is shared by VW Chief Executive Officer Herbert Diess or key stakeholders like the Porsche and Piech owner family.
“VW is one of the few carmakers whose management team is aware that actions are needed in the near-term in order to optimize the positioning of the company,” Evercore ISI analyst Arndt Ellinghorst said in note. Partial listing of VW’s units are “one obvious way through which VW can prepare itself.”
Volkswagen gained as much as 2 percent, and was up 1.7 percent to 142.48 euros at 11:51 a.m. in Frankfurt, compared with a 0.2 percent decline on Germany’s blue-chip DAX Index.
Efficiency Drive
CEO Diess, continuing an asset review that started two years ago, has pledged to make the world’s biggest carmaker more efficient as the industry goes through a seismic shift to make electric cars with new digital features.
VW Chief Financial Officer Frank Witter last month said the company might consider options including a separate listing of the sports-car operations led by Porsche at some point. Such a plan wasn’t “a priority the management is working on,” he said during a Bloomberg Intelligence webinar in London.
Porsche is Volkswagen’s crown jewel and closely connected with its history. The companies were separate until Volkswagen acquired the Porsche brand in 2012 in the aftermath of a failed takeover attempt by the the descendants of Ferdinand Porsche. The family, which was forced to sell the maker of the 911 sports car after financing collapsed on the deal, still controls a majority of Volkswagen’s common stock and would need to sign off on any deal to spin off Porsche.
Ferrari’s listing in 2015 not only showed the supercar maker’s own value, but also exposed weaknesses at parent Fiat Chrysler Automobiles NV’s mass-market operations, Meschke said. Fiat was able to address these more specifically after the spin off, he said. While it’s been a windfall for the Italian-American auto maker, the strategy isn’t infallible. Aston Martin, another luxury sports-car maker that is seeking a Ferrari-like multiple, has slumped more than 20 percent since its London debut this month.
Many large industrial companies, from Daimler AG to Siemens AG, are taking steps to adopt a more efficient structure to be able to react to disruptive changes of their businesses. Trade frictions are adding to the mix to fuel fuel concerns about economic growth.
“When the next economic crisis comes, it’s going to be severe, because it’s going to affect all global regions at the same time as they are now closely connected,” Meschke said. His comments echo warnings by global finance chiefs at the International Monetary Fund’s annual meeting last week, who said tensions over trade and rising interest rates threaten to turn the world economy into a battleground just as global growth peaks.
Porsche, with an operating return of more than 17 percent on sales of 32.5 billion euros last year, faces increased spending demands to start making electric cars. The Taycan, its first purely battery-powered model, will cost more than 1 billion euros to introduce during the second half of next year. It’ll cost slightly less than the $85,000 Panamera four-door coupe, Meschke said. That price tag puts the Taycan head-to-head with Tesla Inc.’s $77,000 Model S.
Porsche will spend another 500 million euros on developing variants of the Taycan and will add electric versions of its existing four-door models like the Macan and Cayenne sport utility vehicles.
“We have said about 50 percent of our cars are going to be electric in 2025, but I can imagine it might be significantly more than that,” Meschke said. Despite the increased spending, Porsche is sticking to its operating profit margin goal of more than 15 percent, he said.
--With assistance from Chris Reiter.
To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net
To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Elisabeth Behrmann
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