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Porsche courts Gulf state funds for landmark IPO

Porsche is looking to secure anchor investments from some of the Middle East’s largest sovereign wealth funds as the iconic sports car maker looks to pull off one of Europe’s biggest listings amid market headwinds and valuation concerns, people familiar with the matter said.

Abu Dhabi’s Mubadala Investment Co. and ADQ are among those considering providing funds for Volkswagen AG’s listing, according to the people, who asked not to be identified to discuss confidential information. State-owned companies in other Gulf markets, including Saudi Arabia, are also considering investments, they said.

IPO advisers have also approached major Canadian and Malaysian funds, as well as Norway’s sovereign wealth fund, one of the people said. Volkswagen is considering offering anchor investors more than 5% of Porsche preferred stock, it said.

The former Volkswagen shareholder Qatar Investment Authority has already decided to become a strategic investor in Porsche. Volkswagen aims to collect firm commitments from other funds by the end of the month, one person said.

Securing more major backers would be a vote of confidence as the German automaker looks to push a premium rating for Porsche. The state of Lower Saxony, another Volkswagen shareholder, and the controlling Porsche-Piech family are targeting a valuation of no less than 60 billion euros ($62 billion), the people said.

Volkswagen’s preferred shares rose by 0.2% on Friday at 3:17 p.m. in Frankfurt, giving the car group a market value of 86.6 billion euros.

luxury pitch

In early discussions with portfolio managers, the IPO was touted as an opportunity to invest in a company that combines top automotive rivals like Ferrari NV and luxury brands like Louis Vuitton. However, some investors are concerned about a listing structure that doesn’t make Porsche more independent from its parent company and headwinds in the IPO market, people familiar with the matter said earlier.

Last month’s decision to give Porsche CEO Oliver Blume responsibility for parent company Volkswagen also drew scrutiny from investors. In a Bernstein & Co. poll of 58 fund managers, 71% said Blume’s dual role was a clear negative for going public.

Consultations are ongoing and there is no certainty the funds will go ahead with firm commitments, people say. A spokesman for Porsche and Volkswagen said more information on the progress of the IPO is expected to be released in late summer. ADQ, Norges Bank Investment Management and QIA officials declined to comment, while a spokesman for Mubadala declined to comment.

Middle East wealth funds control trillions of dollars and have seen their holdings boosted this year by rising energy prices. They’ve pumped money into global markets to take advantage of falling valuations, buying everything from football clubs to luxury electric vehicle startups.

Volkswagen, Europe’s largest automaker, plans to list a minority stake in Porsche to fund and boost the industry’s biggest push into electric cars. By 2026, 89 billion euros will be spent on technologies such as software and electric cars, and the separation from Porsche could offer the group new financing opportunities.

Volkswagen has selected Goldman Sachs Group Inc., Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. as joint global coordinators for Porsche’s IPO.

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