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From the time that Porsche has purchased additional stakes in Volkswagen, everybody has expected that it will soon be making a controlling bid for the takeover of Europes largest automaker. And this is exactly what the German sports car maker has done, during the first week of the month-long bidding process, Porsche AG has offered a bid for the takeover of VW but it was the lowest allowable under the German law and the investors didnt like it at all.

Porsche has acquired 188 common shares and 13 percent shares from Volkswagen shareholders as of the end of last week, basing in a statement to the Elektronischer Bundesanzeiger, which is the governments web site for financial filings.

The German sports car automaker has offered 35.9 billion euros or $48.9 billion for the Europes largest automaker which is 16 percent less than Volkswagens 42.7 billion-euro market value as of March 23, 2007 which is a day before Porsche has announced its plan.

The offer made is not intended for full ownership but more of a controlling stake, through such bid Porsche will be able to prevent any rival bid for Volkswagen especially now that the European court plans to cancel the German law that prevents for a takeover. Volkswagen Chairman Ferdinand Piech whose family controls Porsche has been able to increase his power ever since the sports car maker has bought a great amount of stake in 2005.

Volkswagens shares decline by 1.19 euros or 1.1 percent to 109.56 euros. The stock has gained 28 percent this year considered to be the fifth biggest gainer on Germanys benchmark DAX Index.

The Terms
The German sports car maker has bid 100.92 euros an ordinary share and 65.54 euros a preferred share. The bid period is from April 30 to May 29, 2007. During that period Porsches stake would remained at 30.92 percent of the voting rights. The sports car automaker also added that it is not seeking for a majority stake at this time.

The present bidding is quite important for Porsche since it will enable the sports car maker to make minimum legal bid to all shareholders and would no longer be required by law to present further purchase offers to all investors. The present bid is also a preparation of the German sports car maker for the upcoming elimination of the 47-year-old German law by EUs high court. It can be remembered that the controversial Volkswagen law prevents the takeover of any shareholder regardless of whether they hold the majority stake in the company.

And last February 13 an advocate general at the EUs highest court has recommended the scrapping of the Volkswagen Law by saying that it restricts the free movement of capital. Porsche has also supported the abolishment of the law since it plans to purchase additional stake at Volkswagen to further protect its investment plus increase its control in the largest automaker in Europe. It should be noted that Volkswagen is Porsche largest supplier of auto parts like for example the VW PS pump which is used for the production of sports cars. The two automakers also engaged in joint ventures.

Porsche has called for a shareholders meeting that will beheld in June 26 to discuss its offer. It has also obtained a 35 billion-euro line of credit to finance its purchase of additional Volkswagen shares.

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Benjamin Hudson works as a supervisor at one of the top engineering firms in the business district of Louisiana. He is also a freelance journalist and has passion for anything automotive.