Volkswagen In Delicate Talks With Porsche Heirs

The companies’ fortunes have been intertwined since the 1930s.

Volkswagen (VW) is in advanced talks with the Porsche-Piëch family regarding the €20 billion ($22.4 billion) listing of the iconic car company. The family has ended ongoing speculation that Porsche SE, the family’s investment vehicle, would sell a portion of its stake in VW to fund the purchase of shares in the luxury car marque if there is an initial public offering (IPO).

The IPO could be one of Germany’s largest listings in years but is far from a done deal, owing to VW and Porsche’s complex ownership structure.

With 31.4% of VW shares, the Porsche-Piëch family is the VW Group’s largest shareholder, with 53.3% of voting rights via Porsche SE. Other shareholders include labor unions, the German state of Lower Saxony and 12 independently managed motor brands.

The companies’ fortunes have been intertwined since the 1930s. Still, Porsche became part of VW in 2012 following a reverse takeover in which VW purchased 49.9% of Porsche’s car making business and saved it from insolvency.

Former VW chairman and CEO Ferdinand Piëch engineered the Porsche takeover despite opposition from his cousin and chairman of Porsche SE, Wolfgang Porsche. The family remains split. When Ferdinand Porsche, who created the first Porsche car, divided his inheritance equally among his children, Ferry Porsche and Louise Piëch, he unwittingly created an automotive dynasty mired in acrimony.

Although the third generation, Ferdinand’s grandchildren, have been interested in the car industry, they are slowly retiring or passing on.

One auto analyst, who declines to be identified, suggests that the fourth generation, who are mostly in their 50s and don’t work in the industry, or at all, “are more interested in wealth than the car business—they want to grow their wealth and find a way of keeping their stake in Volkswagen.”

The structure of the IPO will, according to the analyst, hang on how much the family can lower the price without causing an uproar from other shareholders. “That’s the part I find outrageous—because you fund your buyer to sell them something at a lower price, which to be fair we’ve seen before when the Porsche family almost went bankrupt.”