Qatar’s Emir Hamad al-Thani is in the process of obtaining a 25 percent interest in Porsche AG, the German sports car manufacturer.
This move would help relieve Porsche’s heavy debt burden of 9 billion euros ($12.4 billion). Additionally, it gives Qatar’s Emir voting rights in Porsche and positions him among the two rival families that own the rest of its stock—the Porsche and the Piech families.
In early July a special meeting of Porsche’s board of directors would be held to decide on a possible capital increase plan to present to shareholders at the company’s annual general meeting in September.
“At the latest by November, four to five billion euros ($5.6 to $7.0 billion) could be added to Porsche’s accounts by a capital increase,” said German magazine Spiegel.
Qatar, the oil-rich country on the Arabic peninsula, enjoys the highest GDP per capital in the world. It has been eyeing German auto companies for a while and now and finally took advantage as Porsche is struck by financial difficulties.
In fact, this is already the second major investment in the German auto industry by a Middle Eastern country. In late March, the Abu Dhabi state investment fund purchased 9 a percent stake in Daimler AG, the owner of Mercedes-Benz.
Porsche has added on more debt while trying to purchase a majority of Volkswagen AG, which would give it voting rights to take over or merge with Volkswagen. The game of capturing Volkswagen’s shares cost Porsche dearly, amassing its debt to $12.4 billion. Although Porsche has managed to acquire 51 percent of Volkswagen, many disagreements have emerged that eventually blocked a merger.
A major disagreement was the fact that Porsche was heavily indebted, which would put the new Porsche-Volkswagen company at risk of bankruptcy. Fortunately for Porsche, Qatar’s investment could help to relieve the debt and allow it to revive its original plan of merging with the much bigger Volkswagen.
“Porsche regards Qatar as a white knight rescuing it from Volkswagen. At the same time, it is hoping to obtain a loan from the German federal bank KfW to ease the enormous burden of its debts from an ill-fated attempt to takeover Volkswagen,” writes Deutsche Press Agentur.
The Piech family, which sits on Volkswagen’s supervisory board, has mixed feelings about Qatar’s intervention. While Ferdinand Piech is skeptical and against Qatar’s investment, his brother Hans Michael Piech supports it. Because the Piech family owns about 20 percent of Porsche, it has a veto right to reject Qatar’s investment. However, Ferdinand Piech cannot exercise this veto right alone without the support of his brother, and therefore, the deal currently is in effect.
Hans Michael Piech and Porsche officials recently met with the Emir in Doha, Qatar to kindle the deal. The results of the discussions have been very positive and all sides are looking at the Qatar’s intervention as something that will boost both Porsche and, eventually, Volkswagen.
As a next stop, top management and shareholders of Porsche and Volkswagen will hash out the details of the deal by June 30. It remains to be seen how the deal would affect the merger and how the parties would benefit.
