(Bloomberg) — Volkswagen AG is preparing an initial public offering for Porsche, seeking to list its most profitable assets to help boost the parent company’s valuation and fund the push toward electric cars.
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Under a draft plan called “Phoenix,” about 25% of the non-voting preferred stock could be sold to outside investors, according to two people familiar with the plans. People said the Porsche and Beech families would keep a minority idle stake of 25% plus one share.
While the timing of the sale remains in flux, an initial public offering could happen in the second half of this year, they said, who spoke on the condition of anonymity.
Volkswagen’s preferred shares rose as much as 10% after Tuesday’s announcement of a possible initial public offering scheme between the automaker and Porsche Automobile Holdings SE, a company controlled by billionaire Porsche and the Besch family.
The initial listing, estimated to value the sports car brand at up to 85 billion euros ($96 billion) by Bloomberg Intelligence, would partly reverse the turbulent acquisition of Porsche more than a decade ago, and signal the extent of the turmoil sweeping the industry.
Europe’s largest automaker has been pushing for years to adopt a less centralized corporate structure to get smarter and step up the challenge to Tesla Inc. The success was modest. The initial public offering of Traton SE, Volkswagen’s truck maker, has faded amid internal allegations and limited free-floating, while a plan to separate the Lamborghini supercar brands from Ducati Motorcycles has not progressed.
The automaker said Volkswagen’s boards of directors and supervisors have yet to sign a framework agreement with the Porsche SE and a final decision has yet to be made.
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What Bloomberg Intelligence says:
Volkswagen has confirmed what we’ve been expecting for some time, which is that it is in advanced talks about an initial public offering of its Porsche brand, which we estimate is worth €60-85 billion – based on a 55-70% discount on the Ferrari EV/Ebitda – against a market capitalization For Volkswagen, only 112 billion euros. Porsche is taking advantage of its luxury appeal and the advantage of electric cars, with a 40% increase in its battery and electric mix expected by 2025. Volkswagen is trading a low 2.1x 2023 EV/Ebitda, which is 89% off Ferrari and 94% off Tesla, where from Porsche’s initial public offering is likely to generate significant shareholder value.
— Michael Dean, BI . Automotive Analyst
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While VW CEO Herbert Diess seemed to be pouring cold water on Porsche’s slate for about a year now, he’s under pressure to start catching up with Tesla. After the well-received presentation of Volkswagen’s accelerated electric car plans in March last year and successful models such as the Porsche Taycan, efforts faltered and its market valuation remained slim to the US leader in electric vehicles.
Getting pushback support will be difficult even as the industrial momentum for bold moves builds. Volkswagen’s 20-member supervisory board is subject to a complex decision-making process. Workers’ representatives, representing half of the seats, are often allied with two officials from the German state of Lower Saxony to protect jobs. The sprawling Porsche-Biche clan, CEO Deiss’ biggest backer, also needs to merge to give the green light for major strategic reforms.
Dess’ contemplation of deep job cuts sparked a backlash from unions late last year, putting the CEO on the defensive. In the end, Volkswagen agreed to a compromise that included a plan for a €800 million tech campus and pledged to build a new electric car plant near its headquarters in Wolfsburg.
“We believe that the Porsche IPO, which has been a hot topic of discussion for years, is now more likely to actually happen than ever before,” RBC analyst Tom Narayan said in a note. “But what is different now is that the Porsche family is firmly behind them as we expect the Porsche SE to be an IPO buyer of the Porsche brand.”
A plan to include Porsche bells with deep restructurings on the train elsewhere among traditional automakers and suppliers. In the latest example, Ford Motor Co. is looking for ways to decouple the operation of the electric vehicle from its century-old business to unlock value.
Going forward would boost the distressed IPO market in Europe. Equity sales have slowed dramatically this year, after a record high in 2021. Sharp market volatility has deterred issuers as investor appetite dries up amid concerns about geopolitical tensions in Europe as well as monetary policy tightening.
Many of those faced with market volatility, including Norwegian oil and gas company Var Energi AS, had to settle for initial public offering prices and a weak start in the public market. Portfolio managers have become more selective after the weak performance of temporary supply lists last year and the suspension of several recent deals.
Financing Options
The Porsche class could offer a new financing option for the group. Volkswagen is largely dependent on generating enough cash on its own or issuing bonds. Its quirky shareholder structure limits options to raise new equity capital as Tesla has done, without diluting the stakes of major shareholders who control about 90% of VW’s voting stock.
The two companies share a common history dating back to the late 1930s and were officially linked after a long battle for control. Porsche first sought out Volkswagen a little over a decade ago, before the audacious coup failed and the larger manufacturer turned its tables, taking control of the sports car maker in 2009. A relic of that sharp saga is Porsche Automobile Holdings, which owns The voting share in VW is about 53%.
Porsche is the most well-known brand of the stable and highly profitable Volkswagen, among other nameplates such as Audi, Skoda and Bentley. The creation of the multi-brand chassis was the brainchild of Ferdinand Piech, the influential CEO and Chairman of Volkswagen who designed the Porsche car despite the opposition of his cousin, Wolfgang Porsche. Beech passed away in 2019 at the age of 82.
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