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Sat 11 Jul 2009 09:06 AM

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Porsche board to debate $7bn Qatar stake purchase

Two rival factions that control indebted Porsche SE are set for a showdown.

Two rival factions that control indebted automotive holding group Porsche SE are set for a showdown that could decide on the planned merger with majority-owned Volkswagen.

A source familiar with the matter told Reuters on Friday that Chairman Wolfgang Porsche called an extraordinary supervisory board meeting for July 23 to discuss a possible sale of a stake in Porsche SE to Qatar worth over 5 billion euros ($6.97 billion).

The source said the concept included the acquisition by Qatar of a stake in Porsche SE as well as purchasing options on VW stock which are still held by Porsche. The market had previously speculated on a deal valued around 2-3 billion euros.

The source said Porsche management has already "concluded" its negotiations with the Gulf investor and was ready to present a concept to its supervisory board.

Although the Porsche and Piech families would relinquish for the very first time total control over the company, the fresh funds would reduce its net debt by more than half and considerably strengthen the bargaining position of embattled Chief Executive Wendelin Wiedeking.

Under fire, the Porsche CEO hopes to win a bitter power struggle waged against powerful Volkswagen Chairman Ferdinand Piech, a part owner of Porsche SE who holds a blocking minority together with his brother, and force a merger with cash-rich VW at least on equal terms.

"This would most likely also enable a combined and integrated Porsche/VW Group to keep it's A- rating at S&P and Moody's too, which is reportedly a high priority of VW," UniCredit debt analyst Sven Kreitmair wrote in a note.

The source added that Piech is expected at the board meeting to push for his alternative plan that foresees Volkswagen purchasing a 49 percent stake in Porsche AG, the healthy sportscar maker grouped under the financially ailing holding.

Wiedeking has argued that a partial sale would trigger a change of control clause in Porsche's credit lines that could allow its lenders to call its some 10 billion euro loan.

Porsche SE has racked up 9 billion euros in net debt as of the end of January, following its aggressive attempt to take 75 percent control of Volkswagen, Europe's largest carmaker.

A spokesman for Porsche SE, which owns 51 percent of VW's voting stock, confirmed that Wolfgang Porsche had called an extraordinary supervisory board meeting for July 23.

DZ Bank analyst Michael Punzet said it was still unclear whether Qatar would invest directly in Porsche or invest in Porsche's options in VW or both.

"The mentioned amount would fit to the exercise of these options, assuming a strike (price) of around 80-90 euros for options on 58.8 million VW ordinaries," Punzet said.

Punzet reiterated his "sell" stance on Porsche shares, citing the high degree of uncertainty and the possibility that Porsche's board would not make a final decision on July 23.

Porsche shares closed up 0.4 percent on Friday in a lower German market. Volkswagen shares eased 1.9 percent. ($1=.7173 Euro) (Reuters)

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