Porsche family seeks redemption with IPO after tearful defeat

(Bloomberg) — More than a decade after the billionaire Porsche clan waved goodbye to its crown, the family is set to regain direct influence over the sports car maker as parent Volkswagen AG pushes ahead with one of Europe’s biggest initial public offerings.

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The stake sale, aimed at valuing Porsche at up to 85 billion euros ($84 billion) — about as much as its parent — could yield about 10.6 billion euros in revenue for VW. The Porsche family, still led by some of the figures who lost control of the iconic carmaker in 2009 after a VW takeover attempt went awry, will emerge with a blocking minority.

It’s a comeback of sorts for Porsche’s heirs left badly bruised after the sports car maker’s bold attempt to swallow its much larger rival. The two companies share a common history, both in terms of engineering heritage and founding families. Wolfgang Porsche, who remains the family doyen, is the cousin of the late Ferdinand Piech, a longtime VW executive who built the automaker into the multi-brand behemoth it is today.

The Porsche and Piech family’s stake in their eponymous holding company is worth about $10.5 billion, and they have received at least $2.9 billion in dividends over the past decade, according to the Bloomberg Billionaires Index.

Back in 2005, Porsche began quietly acquiring shares in Volkswagen, a company at the time 15 times its size, with a plan to eventually gain full control. But as the financial crisis battered markets worldwide, Porsche Holding in 2009 was forced to abandon the bid and VW turned around and gobbled up Porsche.

The protracted battle culminated in a staff meeting in pouring rain in July 2009, where Porsche management and the family owners conceded defeat. In a teary-eyed speech, Wolfgang Porsche remained steadfast, promising that “the Porsche legend lives on and will never be lost.”

What followed was a complex deal whereby Porsche was then gradually integrated into the huge stable of VW brands alongside Audi, Lamborghini and Bentley. The family emerged as the main shareholder of the parent company.

The family heritage traces back to Wolfgang Porsche’s grandfather, Ferdinand Porsche, who created the VW People Car that later became the Beetle. Ferdinand Porsche’s son Ferry Porsche founded the sports car business. The first vehicle to bear the Porsche name was registered in 1948, the 356 ‘No.1’ Roadster.

The clan today numbers several dozen descendants, though few play an active role in the business, pursuing instead careers ranging from medicine to film to e-commerce. Many live in Austria in the Alpine region of Zell am See, where Wolfgang Porsche likes to retire to the Schuettgut hunting lodge and family members cruise the winding roads in vintage cars.

Spin-out sports car brands have worked for other members of the world’s ultra-rich. Shares in Ferrari NV have risen about 265% since the automaker went public on the New York Stock Exchange, giving Piero Ferrari — son of the company’s founder, Enzo — a net worth of about $4.1 billion today, according to Bloomberg wealth index.

“Having relinquished control in the past, you now have the next generation of family members coming through who have previously cut their teeth in various parts of the Volkswagen empire and see huge potential to unlock shareholder value through a Porsche IPO AG,” said Michael Dean. , senior European auto analyst at Bloomberg Intelligence.

“You have to remember this is essentially a family business,” Dean said.

Complex Structure

Listed Porsche will have a dual share structure similar to Volkswagen with voting and non-voting shares. Porsche’s planned small free float and limited managerial independence – Porsche chief Oliver Blume will continue to be VW’s chief executive – has sparked governance concerns similar to criticisms leveled at VW’s complex structure.

VW is selling 12.5% ​​of the total share capital, divided into 25% non-voting preference shares offered to outside investors and 25% plus one share of common stock in Porsche SE. For the family-owned company to finance the multibillion-euro purchase, VW will pay a special dividend.

The new arrangement will give the family the power to veto important strategic decisions at Porsche. Since the takeover by VW, the brand has sometimes had to go along with moves that ended up at odds with its interests, such as a plan to build electric vehicles with Audi at a plant in Hanover. However, the two companies will remain closely linked to each other — and to the German state of Lower Saxony, another major VW shareholder and home to VW’s largest factory.

“It’s proceeding in typical VW fashion: True independence is nowhere to be seen,” said Ingo Speich, head of sustainability and corporate governance at Deka Investment. “The goal is for the owning family to buy Porsche common stock and keep calling the shots.”

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