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Friday October 9, 2009

Norwegian fund slams VW’s Porsche plans


OSLO: Norway’s sovereign wealth fund, Europe’s biggest equity investor, on Wednesday criticised German vehicle maker Volkswagen (VW) for plans to take over some Porsche assets, which it called costly and “unacceptable”.

The wealth fund, which at the end of 2008 held stock worth US$450mil in VW, did not openly threaten to sell its shares but said it saw “little reason” to support the proposed transactions if its concerns were not alleviated.

“The planned transactions…leave the impression of being designed to suit the needs of the Porsche controlling families at the expense of Volkswagen and its non-controlling owners,” the Norwegian fund said in an open letter to VW board members.

VW was not immediately available for comment.

If its concerns persisted “as (an) investor, we will consider the options open to us in this respect,” the US$420bil fund said in the letter, published on its website.

The fund said the information about VW transactions with Porsche entities and controlling owners “fails to assure” minority owners of the plans’ benefit.

“In total, therefore, the deal appears unacceptable,” said the fund, which invests Norway’s revenues from oil and gas activities in offshore stocks and bonds.

The central bank-run fund called on VW to cancel plans to assist the Porsche and Piech families by buying out their privately held automotive trading business of Porsche Holding Salzburg, unless it demonstrates how the acquisitions have particular strategic value.

It also questioned the terms on which VW aims at investing in Porsche’s car manufacturing division, saying “the market seems to judge that Volkswagen currently plans to pay a rich price for those assets.”

It asked for an independent appraisal of the assets and debt and questioned “the financial logic” behind raising capital in VW’s preference share class only, given the more attractive pricing of its ordinary shares.

“We call on the supervisory board to prepare for raising capital in the ordinary, voting share class. An approval of this will help demonstrate that ordinary shareholders believe a capital raising enhances value,” it said. — Reuters

Norway’s wealth fund is becoming an increasingly active financial shareholder, seeking high corporate governance, environmental and ethical standards for the more than 8,000 companies in which it holds stakes. — Reuters


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