Volkswagen AG is moving ahead with its plan to list a minority stake in sports car maker Porsche despite choppy markets, paving the way for what may be Europe’s largest IPO.
The maker plans to go public as early as this month, barring any significant deterioration in markets, VW said, and is aiming to complete the listing by the end of the year. The move will channel funds to Europe’s biggest automakers to help cover the staggering costs of electrification and software development, giving the multi-billion dollar Porsche-Piech clan more leverage over the luxury automaker.
“We have shown enormous resilience, especially in times of crisis,” said VW and Porsche CEO Oliver Blume in a conversation with reporters yesterday. “Looking back on the Corona crisis, the semiconductor crisis, this year with the Ukraine conflict, we’ve always had very high profit margins and we think that will be very compelling.”
The listing will give the Porsche and Piech family more leverage over their former company, some 13 years after they were forced to sell the sports car business to Volkswagen.
More than a decade ago, family-owned Porsche Automobil Holding SE attempted to take control of the much larger Volkswagen, but the bold, emotion-raising move fell through when funding dried up during the financial crisis.
Following the complex sale of minority interests that raised concerns about corporate governance, the family will exit the company with a 25% blocking interest plus one voting share. Other investors can invest in preferred stock without voting rights.
Volkswagen’s preferred shares even gained 3.9% in Frankfurt trading. The company also submitted its official intention to go public on the Frankfurt Stock Exchange on Tuesday.
With the IPO, VW is hoping for funds that will help underpin its ambitious investment plans. While the company generates strong industrial cash flow, VW risks losing to the ambitions of deep-pocketed tech companies like Alphabet Inc and Apple Inc, which are looking to lay claim to growing digital revenues from the auto industry. The listing plan is grappling with some of the toughest market conditions in years, during which a slowing economy, runaway inflation and rising energy costs have largely halted public listings.
Even as markets plummeted, Porsche has attracted investor interest in its IPO, with a valuation of up to $85 billion. The maker of the 911 sports car and electric Taycan has secured pre-orders, with the shares on offer valued at between $60 billion and $85 billion euros, said the people, who asked not to be identified because the talks were private.
At €85 billion, Porsche’s valuation would more than double Ferrari NV’s market cap, but the Italian automaker with industry-leading margins makes only a fraction of the more than 300,000 cars Porsche produces each year. Still, if achieved, Porsche would be roughly on par with its parent company’s market value, even if VW makes more than 10 million vehicles in a typical year.
Well-known investors, including T Rowe Price Group Inc., have already expressed interest in subscribing for the IPO in this valuation range, the people said. On Monday, VW said the Qatar Investment Authority plans to acquire a 4.99% stake, subject to a cornerstone investment agreement.
Porsche has also gauged interest from billionaires, including energy drink maker Red Bull founder Dietrich Mateschitz, as well as LVMH chairman Bernard Arnault, according to the people.
VW plans to offer Porsche’s preferred shares to retail investors in countries including Germany, Austria, Switzerland, France, Spain and Italy, the company said, confirming an earlier Bloomberg News report.
Many European and US institutional asset managers, which typically invest in large German IPOs, have so far shied away from making firm commitments due to corporate governance concerns, the people said.
Still, Porsche has enough demand to nearly fill its so-called shadow order book at the high end of the range and is oversubscribed at the low end, people said.
The family legacy goes back to Wolfgang Porsche’s grandfather, Ferdinand Porsche, who created the VW People Car, which later became the Beetle. Ferdinand Porsche’s son Ferry Porsche built up the sports car business. The first vehicle bearing the Porsche name was registered in 1948, the 356 “No1” Roadster.
Acting as Joint Global Co-ordinators and Joint Bookrunners in connection with the proposed transaction are: BofA Securities, Citigroup, Goldman Sachs and JP Morgan. BNP Paribas, Deutsche Bank, Morgan Stanley, Santander, Barclays, Société Générale, UniCredit act as Joint Bookrunners. Commerzbank, Crédit Agricole, LBBW and Mizuho act as co-lead managers. Mediobanca acts as financial advisor to Porsche AG.
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