Porsche SE is driving ahead with a 5 billion euro rights issue in an attempt to keep hopes of a merger with carmaker Volkswagen alive by paying off a chunk of its heavy debts. Investors took the planned capital hike in their stride and shares in the sports car maker fell by just 3 percent on Monday.
Porsche is offering holders of ordinary and preference shares the chance to buy three shares for every four they own at 38 euros ($53.4) per share. At Friday's closing share price of 56.22 euros, this represents a discount of 32.4 percent. The German company is having to turn to shareholders after it ran up crippling debts of more than 10 billion euros in a botched attempt to buy VW. It raised its interest to just over 50 percent of VW's voting stock in early 2009, but nearly bankrupted itself in the process. Porsche was eventually forced to seek a merger with its larger rival, but this deal has since been put in doubt by both financial and legal hurdles.
Half of the amount raised will come from the Porsche and Piech clans, along with shareholder Qatar, which control Porsche SE. The families have committed to buying the rights on Porsche's ordinary shares. The cash will be used to redeem bank loans and pay down debt, a core requirement for VW shareholders before they agree to folding Porsche into their own cash-rich company. Porsche's net debt totalled 6.34 billion euros at the end of 2010. "This is the announced step in debt relief," said Michael Muders, fund manager at Union Investment, which owns 348,000 Porsche shares according to Thomson Reuters data. A merger between VW and Porsche also needs to be given the green light by VW's preferred shareholders with an 80 percent approval.
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