VW in 3.3bn Porsche deal

VOLKSWAGEN (VW) agreed to buy a 42 per cent slice of the sports car arm of Porsche yesterday, in another key step towards combining the German carmakers into a European automotive giant.<br /><br />VW said it would pay up to &euro;3.3bn (&pound;2.84bn) this year for an initial stake in the debt-ridden Porsche unit, ahead of the creation of an &ldquo;integrated&rdquo; carmaking group by the end of 2011.<br /><br />To finance the purchase, Volkswagen said it plans to issue preference shares to boost its capital levels some time in the first half of 2010.<br /><br />The tie-up is just the latest in a nearly four-year long series of tie-ups between the two firms, that initially started with Porsche taking a 10.3 per cent voting stake in VW in 2005.<br /><br />Porsche&rsquo;s surrender comes at the end of a power struggle lasting months that eventually led to the departure of its chief executive Wendelin Wiedeking.<br /><br />Volkswagen chief executive Martin Winterkorn, who is poised to run the combined entity and was named head of Porsche last week, said the deal marked &ldquo;a new era&rdquo; for both companies. He said: &ldquo;Porsche is a real enrichment for our company&rsquo;s portfolio.&rdquo; VW&rsquo;s powerful labour chief Bernd Osterloh welcomed the deal.