M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, May 20, 2009

Porsche - VW fun

The on-again-off-again deal between Porsche and VW is apparently back on again.  Both sides agreed to get back to negotiating a deal after having temporarily called the whole thing off just a couple of days ago (here). 

I like this deal mostly because of the back-story.  In the Fall of 2008 Porsche engineered an old-fashioned corner (think Drew, Gould, and Fisk) on the VW stock.  Floyd Norris of the Times did a piece in October 2008 describing how that all went down (here).  The 'short' version of the story:  Porsche had been quietly building a control bloc in VW at the same time as hedge funds were shorting VW.  In the Fall, Porsche announced that it owned some 43% of VW stock with options to buy another 30%.  That bloc combined with a government held bloc of 10% meant that VW shares available in the market for the shorts cover their postitions were almost non-existant. VW ADRs went from $53 on Oct 24 to $219.50 on Oct 28 (Google Finance: VW).  Ouch.
Now that all the fun is behind us, the two companies are looking to do a deal to bring them together with Porsche as a brand within the VW family.   When that deal gets done it will no doubt be an interesting transaction, but not nearly as exciting as the last of the great corners that we were able to witness last Fall. 

- bjmq


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