Porsche's supervisory board gave the go-ahead Monday, March 3, for the luxury German sports carmaker to take a majority stake in its bigger rival and Europe's largest carmaker Volkswagen.
Porsche said it does not intend to merge the two carmaking heavyweights
The move, authorized by Porsche's supervisory body, will amount to an investment of almost 10 billion euros ($15.17 billion), the car maker said.
"Our goal is to create one of the world's most innovative and efficient automobile alliances that will be able to meet the growing international competitive challenges," Porsche chief executive Wendelin Wiedeking said.
The board empowered the Stuttgart-based company to increase its stake in Europe's largest carmaker from just under 31 per cent to more than 50 per cent, Porsche said.
"A new partnership"
Weideking said Porsche would seek the approval of competition authorities for its move, but warned that it could take up to six months before a decision is reached.
Wiedeking hopes the two partners will drive on to greater heights
Once this happens, Porsche would take a majority share in Volkswagen, he said, adding that the company did not plan to merge with Volkswagen but to work together "in a new and collegial partnership."
Porsche shares jumped 3 per cent after the news was announced, and Volkswagen's shares also rose 1.95 per cent to 152.91 euros.
Increasing its stake to 50 per cent is expected to cost Porsche around $10 billion, based on VW's current share price.
The sports car maker spent 5.8 billion euros in June to take its share of VW voting rights up to 30.6 per cent and indicated it had the funds to buy a majority stake.
Partnering with a behemoth
Porsche has a workforce of about 12,000 compared to Volkswagen's 330,000. It produces 100,000 cars a year compared to Volkswagen's annual output of 6.2 million vehicles.
VW rolls out 6.2 million vehicles a year
VW's employees' representatives have been locked in a clinch with Porsche over the structure of a new holding company that would increase the sports car maker's influence in Volkswagen in the event of a takeover. The holding company has been incorporated under European law.
Porsche has offered VW's labor representatives three seats on the new 12-member supervisory board, with three also going to Porsche works council members.
VW labor representatives want a larger share, arguing Porsche's proposals are unfair given the vastly differing sizes of the two companies' workforces. A court hearing on the dispute is set to take place next month.
News of Porsche's move came the same day as Volkswagen announced it had taken a controlling interest in Swedish truck maker Scania, a move that analysts said could pave the way for a merger with German company MAN, creating Europe's biggest maker of commercial vehicles.