By Christiaan Hetzner
FRANKFURT, March 7 (Reuters) - Indebted German automotive holding Porsche SE expects it will still be able to go ahead with plans to merge with larger, cash-rich subsidiary Volkswagen regardless of recent legal risks.
Late last month, Porsche was forced to lower the probability of a successful merger this year to just even odds from a 70 percent likelihood previously, after a probe into insider trading by its former chief executive threatened to hold up the deal.
'The management board of Porsche SE nevertheless currently anticipates that a successful conclusion of the afore-mentioned (legal and tax) reviews would be possible in such a way that the merger can occur -- potentially also after 2011,' Porsche SE said on Monday.
Investors sent shares in Porsche SE sharply lower two weeks ago when the delay was announced, fearing a rights issue would be highly dilutive if carried out before the exchange ratio could be announced.
The parent, Porsche SE, is being folded into its subsidiary, Volkswagen, and in order to facilitate a deal VW's CEO and finance chief have taken over at the helm of Porsche SE.
The lower likelihood of a merger meant Porsche SE had to write down the value of an options deal that allows VW to buy the remainder of the sports car business.
With VW as the counterparty in the trade, analysts say any Porsche loss should result in a corresponding non-cash accounting gain for VW of the same amount.
HIGH MARGIN
Porsche SE furthermore said its sports car business generated an operating margin of 17.8 percent in the truncated fiscal year 2010 spanning the last five months through December.
Porsche AG contributed 106 million euros ($148.5 million) to the parent's profits, equivalent to the 50.1 percent stake it holds in the sports car unit.
Volkswagen, in which Porsche SE holds 32.2 percent of all stock capital and a majority of the votes, contributed another 969 million euros to its results.
'Furthermore, following a deal with the tax authorities Porsche SE was able to book a gain from the release of a provision, that was built in previous years in connection with the tax treatment of trading in stock options,' it said.
'The complete liquidation of the cash-settled Volkswagen stock options also contributed positively to the earnings of Porsche SE,' the holding company added.
In its annual report for the fiscal year 2009/10, Porsche SE had said it planned to sell the remaining cash-settled options it still held at the start of August that equated to about two percent of Volkswagen AG's ordinary shares.
($1=.7139 Euro)
(Editing by Jon Loades-Carter) Keywords: PORSCHE/ (christiaan.hetzner@thomsonreuters.com; Reuters Messaging: christiaan.hetzner.reuters.com@reuters.net; +49 69 7565 1249) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
FRANKFURT, March 7 (Reuters) - Indebted German automotive holding Porsche SE expects it will still be able to go ahead with plans to merge with larger, cash-rich subsidiary Volkswagen regardless of recent legal risks.
Late last month, Porsche was forced to lower the probability of a successful merger this year to just even odds from a 70 percent likelihood previously, after a probe into insider trading by its former chief executive threatened to hold up the deal.
'The management board of Porsche SE nevertheless currently anticipates that a successful conclusion of the afore-mentioned (legal and tax) reviews would be possible in such a way that the merger can occur -- potentially also after 2011,' Porsche SE said on Monday.
Investors sent shares in Porsche SE sharply lower two weeks ago when the delay was announced, fearing a rights issue would be highly dilutive if carried out before the exchange ratio could be announced.
The parent, Porsche SE, is being folded into its subsidiary, Volkswagen, and in order to facilitate a deal VW's CEO and finance chief have taken over at the helm of Porsche SE.
The lower likelihood of a merger meant Porsche SE had to write down the value of an options deal that allows VW to buy the remainder of the sports car business.
With VW as the counterparty in the trade, analysts say any Porsche loss should result in a corresponding non-cash accounting gain for VW of the same amount.
HIGH MARGIN
Porsche SE furthermore said its sports car business generated an operating margin of 17.8 percent in the truncated fiscal year 2010 spanning the last five months through December.
Porsche AG contributed 106 million euros ($148.5 million) to the parent's profits, equivalent to the 50.1 percent stake it holds in the sports car unit.
Volkswagen, in which Porsche SE holds 32.2 percent of all stock capital and a majority of the votes, contributed another 969 million euros to its results.
'Furthermore, following a deal with the tax authorities Porsche SE was able to book a gain from the release of a provision, that was built in previous years in connection with the tax treatment of trading in stock options,' it said.
'The complete liquidation of the cash-settled Volkswagen stock options also contributed positively to the earnings of Porsche SE,' the holding company added.
In its annual report for the fiscal year 2009/10, Porsche SE had said it planned to sell the remaining cash-settled options it still held at the start of August that equated to about two percent of Volkswagen AG's ordinary shares.
($1=.7139 Euro)
(Editing by Jon Loades-Carter) Keywords: PORSCHE/ (christiaan.hetzner@thomsonreuters.com; Reuters Messaging: christiaan.hetzner.reuters.com@reuters.net; +49 69 7565 1249) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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