VW Keeps Porsche IPO on Table Amid Market Volatility

(Bloomberg) -- Volkswagen AG said it will continue to explore an initial public offering of the German manufacturer’s Porsche sportscar brand as markets are roiled by Russia’s invasion of Ukraine.

A listing could happen at the earliest in the fourth quarter, VW Chief Financial Officer Arno Antlitz said Friday. The plan comes on the heels of the fighting in Ukraine, which has sparked volatility across world markets and concerns of higher energy prices.

Europe’s largest automaker and its majority shareholder Porsche Automobil Holding SE -- the billionaire Porsche and Piech family’s main investment vehicle -- confirmed this week they’re in advanced talks about selling shares in the company’s most profitable division. The move would lift VW’s valuation and help fund its shift toward electric cars.

An offering would grant Porsche “greater entrepreneurial freedom” and advance the group’s bid to transform into a vertically-integrated mobility company, VW Chief Executive Officer Herbert Diess said during a call with reporters. “This marks an inflection point and the ideal timing for the potential transaction in order to ignite our EV shift momentum.”

VW’s preference shares rose as much as 4.5% in Frankfurt. The stock was up 3.1% as of 11:10 a.m. local time.

Estimated to value Porsche at as much as 85 billion euros ($95.2 billion) by Bloomberg Intelligence, the move would partly reverse a tumultuous takeover of the Stuttgart-based company more than a decade ago. 

Going ahead will require walking a tightrope between key shareholders that own almost all of the group’s voting stock and external investors under VW’s complex governance structure. The owner family, the German state of Lower Saxony and Qatar together control about 90% of voting rights.

The actual feasibility of an IPO depends on “several different parameters as well as general market conditions,” VW said Thursday in a statement, adding that no final decision has been taken.

The Porsche offering could serve as a blueprint for an IPO of VW’s battery business, a key element of the carmaker’s EV push. VW is open to third-party investment in the division and won’t rule out listing it, Antlitz said.

Listing Details

VW provided more details of a possible Porsche offering late Thursday. The brand’s share capital would be split 50% between preferred shares, which don’t carry voting rights, and 50% common shares with voting rights.

As much as 25% of the preferred shares could be sold on the capital market and Porsche Automobil Holding would acquire 25% plus one share of the ordinary shares. This would give the family a blocking minority on strategic decisions.

Volkswagen will propose the distribution of a special dividend in case of a successful IPO amounting to 49% of the total gross proceeds. This would help the Porsche and Piech families to finance their acquisition of the direct stake in what used to be their family enterprise. 

“The appeal of owning a direct stake in Porsche almost guarantees success,” Jefferies analyst Philippe Houchois wrote in a note. The IPO’s terms, still subject to approval, also “raise governance concerns.”

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