German carmaker Volkswagen AG has reached an agreement to acquire the remaining 50 per cent stake in sports car manufacturer Porsche by early next month.
Under the deal, Volkswagen, which owns 49.9 per cent of Porsche, would acquire the remaining 50.1 per cent stake under the deal. It would pay 4.46 billion euros (USD 5.6 billion) in cash, plus one ordinary share in Volkswagen to acquire the stake, it said in a late night statement yesterday.
A merger was agreed to in 2009 after Porsche's disastrous takeover bid failed and left the sports car maker with huge debt. The two companies had agreed in August 2009 to merge by the end of 2011 but has since faced legal and tax hurdles.
Volkswagen had bought 49.9 per cent stake in Porsche in late 2009 as part of the merger plan.
The German company said that deal, which is expected to finalise by August 1, would boost Volkswagen's earnings.
"The accelerated integration will allow us to start implementing a joint strategy for Porsche's automotive business more quickly, to realise key joint projects more rapidly, and hence to leverage additional growth opportunities in attractive market segments.
"It will also enable Volkswagen AG and Porsche AG to concentrate fully on their operating business by making day-to-day cooperation much simpler," Volkswagen CFO Hans Dieter Potsch said.
Volkswagen said full consolidation of Porsche's operations in its balance sheet would boost its' full-year financial earnings by more than 9 billion euros alongwith its net liquidity would decline by about 7 billion euros.
The German firm said the deal would produce synergies worth 320 million euros, which would be shared equal between the two groups.
According to media reports, if it bought the remaining stake before 2014, the two companies may have had to pay more than one billion euros in taxes, making the deal less attractive.
The reports said the deal has been structured in way which allows Volkswagen to avoid paying the hefty taxes.
The deal "is Good for Volkswagen, good for Porsche and good for Germany as an industrial location," Volkswagen and Porsche Head Martin Winterkorn said in the statement.