By Jan Schwartz and Philipp Halstrick
Deal will let Volkswagen absorb debt-laden Porsche's healthy sports car business.
A face-saving compromise is set to resolve the months-long power struggle between Volkswagen and Porsche SE over who will control the carmaking powerhouse they seek to forge.
Sources close to the transaction said the families that own Porsche were near agreement on a deal that would let Volkswagen absorb debt-laden Porsche's healthy sports car business, Porsche AG, as VW Chairman Ferdinand Piech has been proposing.
VW would initially get just under half of Porsche AG while holding company Porsche SE would remain entirely controlled by the Porsche and Piech families under the plan that has been approved in principle by the families, the sources added.
The deal, which needs approval at board meetings on Thursday, combines elements of rival plans from the two warring camps that formed when Porsche's debt woes forced it to drop efforts to seize control of VW in May and try a merger instead.
"We are working on a middle way," one financial source familiar with the negotiations said, adding that no final decision had been reached and that the future of Porsche Chief Executive Wendelin Wiedeking remained open.
"A lot of people would be happy with this," another source said, noting the compromise could ease concerns among some Porsche owners that VW was getting the best of the deal.
Qatar, which has been in talks with Porsche, would take over derivative contracts owned by Porsche that would give the Gulf state a 20 percent stake in Volkswagen, Europe's biggest carmaker, the sources said.
That would make it a major shareholder alongside the Porsche families and VW's home state of Lower Saxony in the integrated automotive group to be spawned by the deal.
"The Porsche and Piech families would be the major shareholders in the new company, the state of Lower Saxony holds 20 percent and Qatar will have a stake of 15-20 percent in Volkswagen AG by acquiring options on VW shares," Lower Saxony state premier Christian Wulff told WirtschaftsWoche magazine.
A deal along these lines would undercut Wiedeking, who on Thursday evening had to deny speculation that he was about to leave the group.
"I am a happy CEO and feel fit as a fiddle in this role," he said at centenary celebrations for VW's premium unit Audi.
Porsche's top labour leader denied a magazine report that Wiedeking's departure as head of the sports car business was imminent, a report Porsche itself dismissed as "absolute nonsense".
Der Spiegel said Porsche's owners had already agreed to elevate production chief Michael Macht to head Porsche AG.
Porsche shares closed down 1.1 percent and Volkswagen stock slipped 2 percent, lagging a 1.2 percent gain in the DJ Stoxx European car sector index SXAP.
Piech, a co-owner of Porsche, has been pushing to buy Porsche AG as a way to add a 10th brand to his sprawling automotive empire that ranges from tiny VW models to high-end Bugattis and Lamborghinis to heavy trucks.
Piech's cousin Wolfgang Porsche - the chairman of Porsche SE - and Wiedeking had fought such a sale. They had been hoping to bring in Qatar as an investor to help reduce its debt pile and put it on even footing in talks with cash-rich Volkswagen.
The boards of both companies will meet separately in Porsche's home town of Stuttgart on July 23 to discuss a deal.
Porsche had to abandon plans to take full control of its much larger peer as its debt mounted -- sources told Reuters on Wednesday its net debt has surpassed 10 billion euros ($14.11 billion) - just as global car markets collapsed.
That left Porsche with a 51 percent stake in VW, which agreed to enter talks on creating an integrated car group. (Reuters)