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VW CEO sees 30% chance Porsche merger will fail

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VW CEO sees 30% chance Porsche merger will fail

November 1, 2010 06:01 CET

FRANKFURT (Reuters) -- There is a 30 percent chance that investors holding preferred shares in Porsche SE may not be able to swap their stock for equity in Volkswagen, according to VW CEO Martin Winterkorn.

The probability of a Porsche-VW merger under the leadership of VW has diminished as potential legal and tax liabilities have grown in recent months.

"The chances are 70 to 30 that it comes to that," Winterkorn said in comments published by Automobilwoche, a sister publication of Autootive News Europe "Our lawyers are involved in a close examination (of these risks)."

Volkswagen has a put-call option in place that allows it to acquire the remaining 50.1 percent of Porsche SE's sports cars actitivities for a strike price of 3.9 billion euros ($5.41 billion) indepedent of any merger, but the purchase could involve tax risks as well if the option is exercised before the end of 2014.

Winterkorn and VW finance chief Hans Dieter Poetsch said earlier this month that legal and tax issues could delay the deal beyond the end of next year, when the merger contract expires.

Porshe management had launched a risky takeover of Volkswagen, which nearly bankrupted Porsche last year after it could no longer afford to prop up the elaborate structure of VW derivative positions used to build its stake.

Porsche SE was forced to sell its sports car business to VW in stages and it offloaded its cash-settled call options on VW stock to the Gulf state of Qatar for a heavy loss in July 2009.

Poetsch told a conference call on Wednesday that Volkswagen assigned a 30 percent probability the merger would not go through in order to account for the value of financial derivatives linked to Porsche's sports car business under IFRS.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101101/ANE/310309997/1317#ixzz1435LWStX

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