German car giant Volkswagen priced the public offering of preferred stock in its luxury brand Porsche between €76.50 and €82.50 which was largely in line with investor expectations. Shares in Porsche AG POAHY are set to begin trading Sept. 29. It will be one of the largest recent European public listings in years, raising up to $9.4 billion and valuing the iconic carmaker as high as $78 billion. The deal will put Porsche shares in public hands for the first time since 2012 when VW bought the carmaker after Porsche’s failed attempt to use its higher market valuation to acquire VW.
Porsche’s public offering of 25% of Porsche preferred shares, or about 12.5% of the entire company will be combined with a private sale of Porsche ordinary stock to VW’s largest investor, Porsche Automobil Holding SE. (Listed investment fund majority owned by Ferdinand Porsche’s heirs)
The sale of 25% of Porsche could raise €19.5 billion for VW, the equivalent of $19.5 billion with the EURUSD hovering around parity.
Core VW shareholder Qatar Investment Authority, Norway’s Norges Bank Investment Management, T. Rowe Price and ADQ, an investment arm of the Abu Dhabi government, have committed to acquire at least €3.54 billion worth of Porsche’s preferred shares, according to the prospectus
In a reference to Porsche’s iconic 911 sports car model, VW created 911 million Porsche shares, divided evenly between nonvoting preferred shares and ordinary shares with voting rights.
VW announced it plans to distribute nearly half the gross proceeds from the combined Porsche share sale to its shareholders in a special dividend. The issue comes at a time when the appetite for IPOs worldwide has collapsed with the stock market falling on rising interest rates. Specifically, Germany has been hit hard by the energy crisis, soaring inflation, the war in Ukraine, and fears of a global recession. The bookrunners and VW have the difficulty of maximizing proceeds and ensuring a successful IPO in such market conditions. The price range for Porsche’s preferred shares between €76.50 and €82.50, is largely in line with investor expectations.
Porsche heirs back in control
Following the deal effective control of Porsche returns to the founder’s heirs, who will own 25% plus one share of Porsche’s voting stock, giving them a blocking minority in Porsche board meetings and at the annual general meeting.
Porsche SE has agreed to purchase the Porsche voting stock at the same price as the IPO plus a 7.5% premium and aid it would finance the share purchase with up to €7.9 billion in debt. The final amount of debt would be determined by the final IPO price and the amount of Porsche SE’s share of the special dividend.
After distributing the special dividend to its shareholders out of the total proceeds of up to €19.5 billion, VW will retain nearly €10 billion in gross proceeds from the sale of Porsche shares.
Chief Finance Officer Arno Antlitz has said the money raised from the Porsche share sale will be used to finance its transformation to an electric car maker. In these troubled times the additional financing gives VW more time to build a network of battery factories. The plan from there is taking on outside investors in its battery company. VW is building at least six battery factories in Europe alone.
Critics of the Porsche IPO
Some investors have criticized the way in which the Porsche share sale is structured, saying it cemented insider control of both VW and Porsche. In addition, a large portion of the IPO, the sale of nonvoting preferred stock, will go to a small group of investors, leaving a small amount of Porsche’s preferred shares to trade freely.– WSJ
Source: VW, WSJ
From The TradersCommunity Research Desk