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Tue 25 Jan 2011 01:24 PM

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US hedge funds set to relaunch legal fight to Porsche/VW deal

Planned merger of the two carmakers, each part-owned by Qatar Holding, faces obstacles, says CFO

US hedge funds set to relaunch legal fight to Porsche/VW deal
BIG DEAL: US hedge funds are likely to relaunch a legal bid targeting a planned merger between carmakers Porsche and Volkswagen, both of which Qatar Holding owns a minority stake in (Getty Images)

US
hedge funds are likely to relaunch a legal bid targeting a planned merger
between carmakers Porsche and Volkswagen, both of which Qatar Holding owns a
minority stake in, VW’s finance chief said.

“There
is a high probability that the merger will be completed with Porsche, but we
still have to remove some hurdles," Hans Dieter Poetsch told reporters on
the sidelines of an event in Riyadh.

In
December, a US court dismissed a lawsuit brought by ten hedge funds claiming
more than $2bn in damages over Porsche’s attempt to take over Germany’s
Volkswagen.

The
group had accused Porsche of quietly buying up VW shares as part of its plan to
take over the company.

When
Porsche revealed its holdings in October 2008, shares of VW soared, briefly
making the company the world’s biggest by market value.

This
caused massive losses for the hedge funds, which had bet VW shares would fall,
forcing them to cover their short positions at significant cost.

When
asked if he thought the hedge funds would appeal the decision, Poetsch said: “I
think so, yes.”

When
asked if the case could be filed as soon as this week, he said: “I think so,
but this is just a matter of speculation.

“The
situation has not changed and there is a reasonably high probability [of the
merger happening]”

The
first stage of the merger involves the capital increase of Porsche, which Qatar
Holding is expected to contribute to.

The
sovereign wealth fund of the gas-rich Gulf state owns a ten percent stake in
Porsche and a 17 percent stake in VW, Europe’s biggest carmaker.

The
cash injection into the luxury car maker is likely to be completed by May,
paving the way for the merger to proceed.

Pötsch
refused to identify any timeframe for the completion of the merger.

Gas-rich
Qatar has used its wealth fund to purchase a string of trophy assets around the
world. The emirate’s portfolio includes luxury department store Harrods,
purchased in 2010 for $2bn, a five percent stake in Banco Santander’s Brazilian
unit and a stake in the London Stock Exchange.