VW Agrees to Buy Remaining Stake in Porsche

Volkswagen AG says it will pay $5.5 billion to acquire the 50.1% of holding company Porsche SE's sports car business it does not already own.

The cash deal, which has been under negotiation for three years, assumes an equity value of $4.8 billion for the balance of the Porsche AG unit. It also includes dividends that would have been paid to the holding company, which also controls 50.7% of VW's common stock.

VW will avoid a potential tax bill of about $1.2 billion related to the transaction by transferring one share to Porsche SE. The maneuver, which has been cleared with German tax officials, enables the companies to classify the purchase as a restructuring rather than a takeover.

The acquisition will enable VW to finally absorb Porsche AG into its portfolio of brands. VW predicts the agreement will cut operating costs by $396 million. It expects to complete the consolidation by the end of this month.

The deal ends a convoluted power play that began in 2005, when Porsche SE piled up about $12 billion in debt in a failed attempt to acquire VW. The holding company and VW agreed in August 2009 to merge instead. But the deal had been delayed until now by tax and legal issues.