Qatar steps behind the wheel at Porsche

Qatar will own a 17% stake in Volkswagen and Porsche after a merger that will see the sports car maker sit alongside 10 VW brands.

(FILES) - Picture taken on June 17, 2009 shows a general view of the Porsche showroom in the Qatari capital of Doha. Porsche announced on July 23, 2009 the resignation "with immediate effect" of its chairman Wendelin Wiedeking and financial director Holger Haerter. The dynastic Porsche and Piech familes that own Porsche also agreed to wrap up landmark talks with Qatar on a stake in Porsche, and to raise another five billion euros (seven billion dollars) in fresh capital to pay down heavy debt. AFP PHOTO/KARIM JAAFAR *** Local Caption ***  458641-01-08.jpg
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Qatar will own a 17 per cent stake in Volkswagen (VW) and Porsche after a merger that will see the sports car maker sit alongside 10 VW brands that include Skoda, Bentley and Audi. Under the deal, the Qatar Investment Authority (QIA), the Gulf state's sovereign wealth fund, will receive the stake in options that can be converted into shares of VW, Europe's largest car maker.

Porsche collected the options as part of its quest to seek ownership of VW, but its bid went awry this year when its sales deteriorated and banks grew reluctant to lend more money to the car maker, which has debts of ?10 billion (Dh52.27bn). It managed to roll over its credit line but had to pledge its VW shares as collateral. It also received a short-term loan from VW. Qatar would be a "reliable" shareholder, said Christian Wulff, the prime minister of the German state of Lower Saxony, after a meeting of VW's supervisory board yesterday. Lower Saxony owns about 20 per cent in VW and has veto rights.

Qatar is also expected to lend ?750 million to Porsche, informed sources said. A Qatar spokesman declined to comment. VW's directors agreed to merge the two car makers, ending several months of tense merger talks and a public feud between the Piech and Porsche families. Details of the merger will be completed in the next weeks, VW said. The deal makes QIA the third-largest shareholder in VW after Porsche and Lower Saxony.

Wendelin Wiedeking, the outgoing Porsche chief executive, had courted Qatar for several months as Porsche's financial situation rapidly deteriorated. Mr Wiedeking, who had sought to buy a controlling stake in VW, stepped down after 16 years at the helm. He was instrumental in saving Porsche from near bankruptcy in 1993 and turning it into one of the industry's most profitable car makers. The merger ends a fierce ownership battle, after Porsche had accumulated 51 per cent of VW.

At a separate supervisory board meeting at Porsche, its directors supported a capital increase of at least ?5bn, the company said. Qatar is expected to contribute, informed sources said. In late May, the Porsche and Piech families, who control 100 per cent of the company's voting stock, agreed to get an outside investor on board. Since then, Porsche and QIA had been in exclusive talks. A merger would make the combined group the world's biggest car maker. It would also be something of a family reunion. The Volkswagen chairman is 72-year-old Ferdinand Piech while his cousin, Wolfgang Porsche, is the chairman of Porsche. Mr Wiedeking, Germany's best paid manager, will receive a ?50m severance package. Holger Haerter, the chief financial officer at Porsche, also stepped down.