Volkswagen is expected to rubber stamp landmark Porsche IPO plan source

Attendees look at the 2022 Porsche 718 Cayman GT4 RS during the 2021 LA Auto Show in Los Angeles, California, U.S. November 17, 2021. REUTERS/Ringo Chiu

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HAMBURG/FRANKFURT, Sept 5 (Reuters) – Volkswagen’s ( VOWG_p.DE ) supervisory board is expected to approve a plan to list sports car maker Porsche in a long-awaited IPO, a person familiar with the matter told Reuters on Monday.

The board is now meeting and is expected to vote in favor of an IPO, the person said.

Volkswagen declined to comment.

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The green light will come at a difficult time for investors: An escalation in an energy conflict between Russia and Europe has caused major market turmoil.

The car manufacturer will publish a so-called intention to float for the potential IPO in late September or early October, provided the supervisory board gives the go-ahead. read more

But it could shorten or extend the four-week period for buyers to express interest, or withdraw their plans altogether, if investors do not express enough enthusiasm, two sources close to negotiations said.

“It would be the technical go-ahead, nothing more,” said one of the sources. “It paves the way, but this will not guarantee that the stock exchange bell will ring in the end.”

The intention to float is expected to include an offer to retail investors in countries in Europe including France, Spain and Italy, two sources close to the negotiations said, an attempt to tap into Porsche’s loyal fan base.

Volkswagen will also decide whether to approve 25% plus one share of ordinary shares in Porsche AG to be sold to Porsche SE, as stipulated in a framework agreement from the two parties in February. read more

That would give the Porsche and Piech families, who control Porsche SE, a blocking minority – and strengthen their push for greater control under new CEO Oliver Blume.

‘CLEARLY POSITIVE’ Under the framework agreement from February, 25% of the preference shares will be sold on the open market, corresponding to only 12.5% ​​of Porsche’s total capital. Even that could generate up to 10.6 billion euros, based on Reuters calculations.

Ordinary shares, exclusively owned by Volkswagen and Porsche SE under the plans, will not be listed.

Investors expect a valuation between 60 billion and 85 billion euros, with the more optimistic pointing to the strong Porsche brand and others highlighting the free-falling valuations of other luxury carmakers such as Aston Martin and Ferrari.

At the high end of estimates, the IPO could be the biggest in German history and the biggest in Europe since 1999, Refinitiv data showed.

The Qatar Investment Authority, which owns 10.5% of Volkswagen and 17% of the voting rights, will also become a strategic investor in Porsche AG’s preferred shares in the event of an IPO.

But some investors say that with European stocks on a downward spiral, inflation at record highs and Russia cutting off gas supplies, it’s a dangerous time for a stock market debut.

“Market conditions are currently very unfavorable,” said Ingo Speich, head of sustainability and corporate governance at top-20 Volkswagen investor Deka Investment, declining to comment on whether Deka would buy Porsche shares.

Analysts at Stifel said: “VW should work on the timing: the plan for IPO was announced on the same day as Russia invaded Ukraine, ‘Intention to Float’ comes out exactly when Russia stops supplying gas to Germany.”

Germany’s auto association expects a 4% drop in passenger car deliveries in Europe this year, with the hoped-for post-pandemic recovery yet to emerge. read more

The Stifel analysts also said the plan was “clearly positive” for Volkswagen and top shareholder Porsche SE ( PSHG_p.DE ).

Volkswagen has repeatedly claimed that an IPO is the key to financing its €52 billion switch to electrification.

Porsche’s status as a luxury brand capable of raising prices makes it a moneymaker for the Volkswagen group. Operating profit rose 22% in the first half of this year, compared to an 8% drop for the mass-market Volkswagen brand.

Shares in both companies continued to fall along with the broader market on Monday after Russia’s move to halt flows via the Nord Stream 1 pipeline indefinitely. read more

($1 = 0.8687 pounds)

($1 = 1.0084 euros)

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Reporting by Paul Carrel, Victoria Waldersee, Jan Schwartz; Emma-Victoria Farr, Christoph Steitz, Ilona Wissenbach in Frankfurt Additional writing by Tom Sims; Editing by David Evans, Matt Scuffham and Matthew Lewis

Our standards: Thomson Reuters Trust Principles.

Emma-Victoria Farr

Thomson Reuters

Reports on European M&A with previous experience from Mergermarket, Bloomberg The Daily Telegraph and Deutsche Presse Agentur.

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