Vw Takeover

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Volkswagen and Porsche
- Corporate Finance Case study:
Mergers & Acquisitions of listed companies by
Joachim Häcker

What is the macro view of this case study?
Small fish tries to eat big fish (financial figures are end of 2005 and rounded):

VW: Market cap: €16 bn
Book value: €24 bn
Cash and cash equivalent: €8 bn
(+€4 bn marketable securities)

Porsche: Market cap: €11 bn
Book value: €3.4 bn
Cash and cash equivalent: €3.6 bn

VW Porsche case study – by Joachim Häcker
Seite 1

What is the macro view of the case study?
What is the agenda of this presentation?
What is the agenda of this presentation?

1. Basic understanding:
Basic understanding:
How did the small fish try to eat the big fish - the takeover process! 2. Question 1:
Question 1:
What does Porsche need to clarify in order to successfully attack the big fish? 3. Question 2:
How can Porsche make sure that nobody realizes that the small fish is about to eat the big fish? 4. Question 3:
How can Porsche finance the attack?

VW Porsche case study – by Joachim Häcker
Seite 2

1. Basic understanding of the takeover process: The situation of VW in 2005 P/B ratio of VW, Daimler-Chrysler and BMW, values rounded off (status: 2005 end) € bn

€ bn

€ bn

VW: Lowest P/B ratio
VW Porsche case study – by Joachim Häcker
Seite 3

1. Basic understanding of the takeover process: The situation of VW in 2005 Porsche: Growth of turnover from 2000/2001 – 2004/2005

CAGR of 10,2%
VW Porsche case study – by Joachim Häcker
Seite 4

1. Basic understanding of the takeover process: The situation of VW in 2005 Porsche: Growth of net profit margin from 2000/2001 – 2004/2005

Net profit margin almost doubled from 2001 to 2005
VW Porsche case study – by Joachim Häcker
Seite 5

1. Basic understanding of the takeover process: The situation of VW in 2005 Return on Equity Ratio, Porsche and the competitors (Status as of: 2004 or 2004/2005)

Incredible high profitability of Porsche
VW Porsche case study – by Joachim Häcker
Seite 6

1. Basic understanding of the takeover process
Porsche tries to acquire VW in 4 phases:

VW Porsche case study – by Joachim Häcker
Seite 7

Phase 1: Porsche entered in VW?
Before September 25th, 2005, Porsche held a 5% minority share in VW. Shortly thereafter, their holdings increased to ca. 19%. Additionally, Porsche had options of another 3%. VW 19% Additi
3% VW
shareholding structure after the entry of Porsche (status as of: autumn 2005):

Porsche was the biggest principal shareholder, followed by the Federal State of Lower Saxony. Through options, Porsche was able to increase its interest to more than 20%, thus obtaining blocking minority status

obtaining a blocking minority status
VW Porsche case study – by Joachim Häcker
Seite 8

Phase 1: What was the Investor Reaction to Porsche’s entry into VW? VW ordinary share, price movement from 12th Sep. 2005 – 30th Sep. 2005

Porsche announced having a blocking minority
Basically no effect on VW share price
VW Porsche case study – by Joachim Häcker
Seite 9

Phase 1: What was the Investor Reaction to Porsche’s entry into VW? Trading volume of ordinary VW shares, 12th Sep. 2005 – 30th Sep. 2005

The trend line shows above average trading in VW securities from September 21st through 27th. During this period, Porsche seemed to have acquired VW ordinary shares, thus increasing demand .
VW Porsche case study – by Joachim Häcker
Seite 10

Phase 1: What was the Investor Reaction to Porsche’s entry into VW? Price movement of Porsche from 12th Sep. 2005 – 30th Sep. 2005

Porsche shareholders were sceptical about the company’s press release. In fact, after the ad hoc announcement, Porsche’s share price dropped 10.4%.
10
VW Porsche case study – by Joachim Häcker
Seite 11

Phase 1: What was the Investor Reaction to Porsche’s entry into VW? Traded volume of Porsche share from 12th Sep. 2005 – 30th Sep. 2005

The first trading day...
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