Tuesday, Sep 27, 2011


    By Beate Preuschoff 
    Of DOW JONES NEWSWIRES

FRANKFURT (Dow Jones)-- Sovereign wealth fund Qatar Holding LLC said Tuesday it continues to support Volkswagen AG's (VOW.XE) and Porsche Automobil Holding SE's (PAH3.XE) plan to forge a combined company after the two German auto makers were forced to review their initial merger agreement due to persistent legal issues.

"We're working with them [...] It's a matter of time [for the combination to happen]," Qatar Holding Chief Executive Ahmad Mohamed Al-Sayed said on the sidelines of a conference in Berlin.

Qatar is Volkswagen's third-largest shareholder with a 17% voting stake and holds a 10% voting stake in Porsche. The Arab emirate is set to emerge as the third anchor shareholder of a combined company along with the Porsche and Piech families and the German state of Lower Saxony.

"If there is now a different way, we may as well try to help to make it happen," Al-Sayed said.

Earlier this month, Volkswagen and Porsche admitted that their plan to decide about the merger by the end of this year won't work out. Volkswagen said its management board will look into alternative ways to create a combined company amid persistent legal issues and expects to present them to the firm's supervisory board by the end of this year.

Several U.S. hedge funds have filed lawsuits in a New York court over alleged market manipulation at Porsche when the Stuttgart-based firm built its 51% stake in Volkswagen and acquired complex stock options to take over full control of its much-larger peer.

Porsche's bold move, however, backfired when credit markets dried up during the financial crisis and the company had to agree to a tie-up under Volkswagen's leadership.

German public prosecutors are looking into allegations of market manipulation as well. Investigations continue and it is uncertain when these legal issues can be resolved.

In August 2009, Volkswagen and Porsche decided to forge a joint company after a fierce power struggle. Following the agreement, Volkswagen took a 49.9% stake in Porsche's core sports-car unit and acquired options to take over the remaining 50.1% stake at a later stage if the merger doesn't work out as planned. Porsche's holding company would then remain a separate entity for the time being.

Volkswagen Chief Financial Officer Hans-Dieter Poetsch reiterated earlier this month that the merger with the holding company is still the preferred scenario, noting that exercising the option to take over the sports-car business before the second half of 2014 would trigger a significant tax burden. He said Volkswagen would look into whether or not the anticipated cost synergies through a closer tie-up would justify facing a higher tax bill.

-By Beate Preuschoff, Dow Jones Newswires; +49 69 2972 5500; beate.preuschoff@dowjones.com

(END) Dow Jones Newswires

27-09-11 1337GMT