1) Porsche attempted a hostile takeover of Volkswagen by acquiring shares without management approval, reaching 42.6% ownership. However, the financial crisis caused problems as Porsche's debt grew and car sales declined. 2) Volkswagen eventually negotiated an agreement in 2009 to acquire 49.9% of Porsche to help with its debt issues in exchange for cash and shares. 3) By 2012 Volkswagen completed its full acquisition of Porsche, gaining 100% ownership and ending the hostile takeover attempt.

1. Porsche and Volkswagen
By
Group 29: Chaokai Zhang; Jiacheng Shen; Qiaowen Huang;
Xiaozhe Wen; Yuming Lin
- hostile takeover case study -

2. Hostile takeover and takeover defenses01
Introduction of two companies02
Acquisition process and influences to
stock prices
03
Conclusion04
CONTENT

3. Hostile takeover and takeover defenses
PART ONE
The definition of hostile takeover and different types of takeover defenses.

4. Definition of hostile takeover
A hostile takeover is the acquisition of one company (called the target
company) by another (called the acquirer) that is accomplished not by
coming to an agreement with the target company's management, but
by going directly to the company's shareholders or fighting to replace
management in order to get the acquisition approved. A hostile
takeover can be accomplished through either a tender offer or a proxy
fight.
- Investopedia
Acquirer
Target
company
(owners)
Managers
Tender offer

5. Takeover defenses
Several common takeover defenses:
White Knight - Friendly potential acquirer sought by a target company threatened by an
unwelcome suitor.
Shark Repellent - Amendments to a company charter made to forestall
takeover attempts.
Poison Pill - Measure taken by a target firm to avoid acquisition.
Golden Parachutes – Generous payoff to the managers.
Pac-man Defense– the target firm turns around and tries to acquire the other
company that has made the hostile takeover attempt.

6. Introduction of two companies
PART TWO
An overview of Porsche and Volkswagen, which we will present scale and
profitability of these companies.

7. Acquirer
04Porsche Automobile Holding SE, usually shortened
to Porsche SE, is a German holding company with
investments in the automotive industry. Porsche AG is
an automobile manufacturer specializing in high-
performance sports cars, SUVs and sedans, a 100%
subsidiary of Porsche SE.

8. Porsche: Growth of turnover from 2000/2001 – 2004/2005
Performance of Porsche

9. Return on Equity Ratio, Porsche and the competitors Status as of: 2004 or
2004/2005)
Comparison of two companies’ performance

10. Target company
• Volkswagen is a German automobile manufacturer
• Founded in 1937
• Largest car manufacturer in Europe
• Cars sold worldwide in 153 countries
• VW Group encompasses 12 cars brands

11. Acquisition process and influences to stock prices
PART THREE

12. Motivations of takeover
• 20% Porsche engine and its transmission is made by
Porsche worker, the rest is outsourced, mainly to VW.
• Porsche envisioned the future demand for products designed
by Porsche but co-produced by VW.
• Significant synergies on both the income and the cost side.

13. Acquisition process and influences to stock prices
• September 25th, 2005, Porsche increase their holdings from 5% to 19%，through
option, Porsche was able to increase its interest to 22%.
• Became the biggest principal shareholder, thus obtaining veto power.
• No effect on VW share price.
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Shareprice in VW

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• In the meanwhile, Porsche shareholders were doubt about the company’s press
release.
• Porsche’s share price dropped 10.4%.
• Investors sold Porsche’s stock.
Acquisition process and influences to stock prices

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Acquisition process and influences to stock prices
November 2006
• Porsche just did not buy VW shares directly: Instead, it (again) acted
through its options. This way, Porsche effectively “sneaked” its way to the
30% mark within one year.
• Porsche increased its VW share to 27.4%. The price of VW common stock
was at 82.25 Euro, and had nearly doubled in a year.
Edging towards the 30% mark

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Acquisition process and influences to stock prices
2007.10: Abrogation of Volkswagen Law which was aimed at protecting
Europe's biggest car maker Volkswagen.
• VW lost its barrier.
• The VW stock price dropped from 198 to 150 euro.

17. • October 2008, most fund short the share of VW.
• By the end of October 2008 short sellers reacted with panic buys when Porsche’s
stated that it held 42.6% VW common stock plus 31.5% cash-settled call options in
bonds; Only few VW shares remain available on the market(the free float diminished
to 5.9%), resulted in a prices up, VW stock worth more than 1000 Euro
• Nov 2008,Porsche unloaded 5% of VW call options, the VW rate normalized, but still
overvalued.
Acquisition process and influences to stock prices
Approaching the 75% hurdle

18. The turning point of the acquisition: financial crisis in 2008
Acquisition process and influences to stock prices
1. Porsche had a huge debt burden
4. Car sales declined
3. Abolition of New Volkswagen Law still needed further negotiation
2. Tight credit markets

19. Porsche’s car sales decline because of the financial crisis
Acquisition process and influences to stock prices
The economic crisis hit all global automotive companies. Also Porsche
could sell less cars. In response to dwindling sales figures, Porsche had to
curb its production.

20. Porsche stock prices in 2009
Acquisition process and influences to stock prices
2009.5.6: A negotiation between Volkswagen and Porsche was held because
of debt problems of Porsche.
Porsche: €44.76 35.77 Volkswagen: €195.79 198.37

21. Porsche merger with Volkswagen VW
Acquisition process and influences to stock prices
2009.07.23: Volkswagen issued a statement announced that it has paid 3.9
billion euros to acquire 49.9% stake in Porsche AG and the Holding plans
will be complete in 2011
Porsche: €40.12 38.77 Volkswagen: €216.49 221.34

22. Conclusion
PART FOUR

23. Conclusion
Initial merger proposal: The saga of the Porsche-Volkswagen
began with an attempt by Porsche through running to obtain up
to 75% of VW.
Final outcome: Due to the recession and difficulty of obtaining
capital at reasonable rates, Porsche was force to Volkswagen
for help.

24. Acquisition process and influences to stock prices
2012.08.01, Volkswagen completed the full acquisition of Porsche AG.
Porsche SE will receive about 4.46 billion euros in cash plus a surge of
Volkswagen ordinary shares. So far, Volkswagen holds a 100% stake in
Porsche AG.
Porsche merger with Volkswagen VW

25. References
Alan J. Auerbach, ed (1987). Mergers and Acquisitions. Chicago: University of Chicago Press
Emily Hughes (2009), Fast bucks: how Porsche made billions. Retrieved 13th February 2016
Ed Grabianowski, How Hostile Takeovers Work. Retrieved 13th February 2016
Investopedia, Hostile Takeover.
from http://www.investopedia.com/terms/h/hostiletakeover.asp#ixzz40uomYLG4
Investopedia, Pac-Man Defense. Retrieved 13th February 2016 from
http://www.investopedia.com/terms/p/pac-man-defense.asp
Slide share, Hostile Takeover Defenses. Retrieved 13th February 2016
The guardian (2012), Volkswagen swallows Porsche. Retrieved 13th February 2016
Wikipedia, Volkswagen Law. Retrieved 13th February 2016 from
https://en.wikipedia.org/wiki/Volkswagen_Law

26. THANKS FOR YOUR WATCHING