VW supports Qatar buying stake

Volkswagen would support the Gulf state of Qatar taking a substantial voting stake in either its debt-laden parent Porsche or in VW itself, Europe's largest carmaker said on Monday. "In principle we view this positively since it would accelerate the process to form an integrated group with 10 brands," a VW spokesman said, using phrasing approved by both companies. They are considering merging after Porsche dropped attempts to take full control of VW. VW's chairman, Ferdinand Piech, is locked in a struggle for control with his cousin Wolfgang Porsche, who chairs the holding company that owns Porsche's sports car business and 51 percent of VW's ordinary shares. Focus magazine said that Qatar was considering either taking a stake in the listed company Porsche Automobil Holding via a capital increase, or in VW directly by buying VW voting stock held by Porsche's derivative trading partners. Hussein al-Abdullah, the executive director of the sovereign wealth fund Qatar Investment Authority (QIA), declined to comment on Monday as did its Minister of State for Foreign Affairs, Ahmad al-Mahmood. VW ordinary shares rallied on Monday on speculation that Qatar could eliminate a stock overhang by scooping up the more than 20 per cent of VW voting shares owned by Porsche's counterparties to cover their exposure on certain derivative contracts. Porsche's 9 billion euro net debt pile as well as the risk of significant accounting writedowns on its VW stake should its counterparties flood the market with their shares have reduced its negotiating leverage with VW. As part of efforts to bolster its balance sheet, the sportscar maker has sought 1.75 billion euros in loans from German state-owned development bank KfW. A decision is expected by June 23. "Finding an investor would certainly help Porsche to avoid more critical liquidity issues. However, it is hard to see how it could generate upside for the share price," analysts at Sal Oppenheim said. The bank said it believes Porsche's share price already reflects the assumption that it would find a buyer for 25 per cent of VW at the strike price of certain put options it wrote and that Porsche will get out of the deal relatively unharmed. "We think that is highly unlikely and reiterate our negative stance on the stock," it wrote, sticking to its "sell" rating and 20 euro fair value. Porsche shares were up 0.8 per cent at 47.35 euros while VW ordinaries were up 3.7 per cent at 250.03 euros at 1335 GMT. VW's preferred stock had slipped 0.8 per cent to 53.29 euros, while the DJ Stoxx European autos sector index was off 0.6 per cent.