Porsche revs up for €5bn share issue and Volkswagen merger

DEBT-LADEN German carmaker Porsche has approved an almost €5bn (£4.4bn) capital increase, clearing the way for a merger with Volkswagen.

Porsche said last night it had fixed the subscription price for the new ordinary and preferred shares -- which will have dividend rights starting as of August 1, 2010 – at €38 apiece, and the subscription ratio at 1:0.75. The figure is a discount of more than 30 per cent on last week’s closing price of €56.

The carmaker added that it expects the public offering to be approved by German financial watchdog BaFin today. The subscription period for the new shares is then due to last from 30 March until 12 April.

Provided that the new shares are fully subscribed, Porsche will raise net proceeds of about €4.89bn. The money will be used to meet €5bn in loans which are due to mature by the end of the year. The firm hopes to reduce its net debt to €1.5bn from €6.34bn.

Deutsche Bank, Morgan Stanley and JPMorgan are the lead banks underwriting the deal.

Porsche finance chief Hans Dieter Poetsch said last week shareholders subscribing to the capital increase would get a payout in June.