VW Is Said to Weigh Listing of Porsche Sports-Car Division

VW Is Said to Weigh Listing of Porsche Sports-Car Division

Volkswagen AG is considering a separate listing of its Porsche sports-car unit in a deal that could boost its valuation and bring in a significant amount of cash, according to people familiar with the matter.

The world’s second-largest carmaker is speaking with advisers to study the merits of a potential initial public offering or spinoff of Porsche, the people said, asking not to be identified discussing confidential information. VW could use any proceeds from a listing for acquisitions or technology investments, according to the people.

Chief Executive Officer Herbert Diess sounded the alarm in an interview with Bloomberg News last month about how Tesla Inc. and other electric-vehicle companies are cashing in on market optimism about their growth prospects. Investors have taken a dimmer view of VW and other incumbents, who will need to spend tens of billions to develop EVs while restructuring operations that revolve around combustion engines.

VW’s preferred shares rose as much as 6% in Frankfurt trading. At about $757 billion, Tesla’s market value is roughly seven times higher than VW’s 90 billion euros ($109 billion).

“A Volkswagen IPO of its Porsche brand would be a bold solution to generating much-needed shareholder value,” Michael Dean, a Bloomberg Intelligence analyst, said in a note. Porsche’s plan to be almost all-electric by 2030, with the exception of the 911 model, could “attract Tesla-like multiples while generating a Ferrari-like Ebitda margin.”

Dean said his analysis indicates that Porsche has a value of 110 billion euros, more than its parent.

Listing Timetable

A Porsche listing could take place next year, though no firm timetable has been decided, the people said. VW plans to keep a majority stake if it pursues an IPO of the business, according to the people.

Deliberations are ongoing, and there’s no certainty they will lead to a transaction, the people said. A representative for VW declined to comment. Manager Magazin reported earlier Thursday that VW is weighing a listing of Porsche, citing unidentified people.

VW so far has little to show for the asset review it started in 2016, in the wake of its diesel-emissions scandal, to explore options for niche brands and non-core operations. The company pushed through a downsized IPO of its trucks unit Traton SE in 2019 after internal wrangling almost derailed the project.

Labor leaders and the Porsche and Piech families who own VW resisted efforts in 2017 to sell Ducati in 2017, and similar opposition emerged late last year when reports speculated the company might offload the motorcycle unit. While VW folded Ducati, Lamborghini and Italdesign into a structure that made it somewhat easier to make ownership changes, the company announced a month later that it would keep them.

Valuation Frustration

Valuation has been a vexing issue for Diess, 62, who set a goal in 2019 to make VW worth 200 billion euros. The Wolfsburg, Germany-based company has ample cash to afford a massive budget to develop EVs and invest in the software the CEO sees as critical to the industry’s future.

VW already has placed bets on promising startups including battery companies NorthVolt AB and QuantumScape Corp. It also invested $2.6 billion in Argo AI, Ford Motor Co.’s autonomous-car development partner, in 2019.

After Diess agitated late last year for a more comprehensive overhaul of VW and clashed with key stakeholders, the supervisory board defused the conflict by throwing its full support behind the CEO and naming several of his allies to key management posts. The company said it intended to hammer out a plan with unions by the end of this quarter to reduce fixed costs 5% by 2023 and lower material costs by 7% in the next two years.

Dramatic History

A Porsche listing or IPO would partially reverse an acquisition concluded in 2012, when Volkswagen bought the remaining 50.1% stake in Porsche’s automotive business for 4.46 billion euros. That step ended a seven-year takeover saga that divided two of the most powerful families in Germany.

The two brands are historically linked through Ferdinand Porsche, the creator of the original VW Beetle. His descendants, who controlled the sports-car maker, racked up more than 10 billion euros of debt in an unsuccessful attempt to take over Europe’s largest carmaker.

The two companies agreed to combine in 2009. The deal made the Porsche-Piech clan, which included the late former VW CEO Ferdinand Piech, Volkswagen’s largest shareholders.

The operating Porsche unit for which VW is considering a listing or IPO is separate from Porsche Automobile Holding SE, a holding company that has 53.3% of VW’s ordinary shares.

©2021 Bloomberg L.P.

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