FRANKFURT -- Porsche Automobil Holding SE on Sunday said it had a near-75% stake in Volkswagen AG, a much larger stake than the market expected, and said it wanted to tighten its grip on Volkswagen with a so-called domination agreement that would give it access to Volkswagen's cash flows.Porsche announced it had control of 31.5% of Volkswagen through cash-settled options in addition to the 42.6% of shares it currently holds, leaving it just 0.9% short of the 75% level needed to log Volkswagen's revenues and assets in its own books.
Previously, Porsche's Volkswagen stake was known to be 35.14% plus an undisclosed number of options.
"The target is to raise this to 75% in 2009, so long as the economic conditions permit, and pave the way for a domination agreement," Porsche said.
A domination agreement under German law requires the control of at least 75% of a company's voting rights at a shareholder meeting.
A spokesman for Volkswagen said the auto maker expected the move and continues to welcome Porsche's investment. Porsche said it disclosed the size of its stakeholding after it became clear that there were more short-sellers in the market than it expected, who now get the chance to clear their positions without any major risk.
Investors betting on Volkswagen's share price to fall have triggered huge share-price movements recently. The volatity of Volkswagen's shares was partly because of its small free float, as the German state of Lower Saxony still controls slightly more than 20% of the voting rights.
[VW logo] Associated Press
A VW spokesman said the auto maker expected Porsche's move and continues to welcome its investment.
Porsche's announcement Sunday makes it clear that barely 5% of the shares are in free float.
Volkswagen's labor unions said they "fiercely oppose" Porsche efforts to achieve a domination agreement. "It would be a catastrophe for the more than 360,000 employees of Volkswagen if managers who trample on workers' rights take over control at this company," said Volkswagen's top labor representative and supervisory board member, Bernd Osterloh, in a statement.
Meanwhile, Porsche said Friday that the rift between its owners, the Piëch and Porsche families, has been resolved, and both families now fully support Porsche Chief Executive Wendelin Wiedeking's plan to take over Volkswagen.
Last month, Volkswagen Chairman Ferdinand Piëch abstained from a crucial board vote, allowing labor representatives to push through a measure that could have hindered Porsche's takeover plans. Under the measure, Porsche would need approval from Volkswagen's supervisory board for any cooperation deal between it and Volkswagen's Audi AG luxury-car unit.
Mr. Piëch's abstention surprised his cousin Wolfgang Porsche, who is chairman of Porsche's supervisory board and also serves on VW's supervisory board. In addition, it caused confusion about the plans of the Porsche and Piëch families, which control 100% of the voting rights in the sports-car maker.
Mr. Porsche said in a statement Friday that the "committee for special business connections" formed by the board vote could be dissolved at the next meeting of Volkswagen's supervisory board, the equivalent of a U.S. board of directors. Mr. Porsche added that Mr. Piëch backs the move to disband the committee.
"It wasn't in the interest of Ferdinand Piëch if there were uncertainties about the joint goal of the families regarding the stakeholding in VW," Mr. Porsche said.
Mr. Piëch, previously Volkswagen's chief executive, has close ties with the car maker's labor unions. His support is crucial for Porsche's plan to take over the wheel at Volkswagen, Europe's biggest auto maker by sales.
VW said Friday that sales in the first nine months of 2008 were up 3.9% from a year earlier at 4.8 million vehicles.
