EU court ruling will allow Porsche to make bid for VW

Porsche is considering
buying a larger stake in Volkswagen.

FRANKFURT, Germany (AP) — Sports car maker Porsche has an open road to make another bid for Volkswagen now that the European Union’s highest court struck down the nearly 50-year old “VW law” enacted to protect Europe’s largest automaker from a hostile takeover.

Tuesday’s ruling will reverberate across Europe, where many governments have attempted to protect companies they see as vital to their economies from being bought, particularly by foreign investors.

German politicians and labor unions had argued that the 47-year-old measure was needed to protect local jobs.

The EU Court of Justice, however, said the German law — which capped a shareholder’s voting rights at 20 percent, whatever the size of its holding — limited “the free movement of capital” that is a tenet of the European Union.

It also said the measure discouraged foreign investors from taking a stake in Volkswagen, because the German government was able “to exercise considerable influence” over the company. The German state of Lower Saxony is VW’s second-biggest shareholder.

The court ruling is a triumph for the European Commission, which has fought several battles against European governments and their “golden shares” in critical companies.

“Special rights have become an ever-more-endangered species on their way to extinction,” EU spokesman Oliver Drewes said. “They dissuade investment in the company in their full potential.”

The EU is also looking at other companies, and countries, including Telecom Italia and Portuguese stakes in Portugal Telecom, Energias de Portugal and GALP Energia. It has warned both Hungary and Poland over laws that give the government rights in several companies.

As the EU basked in its triumph over the “VW law,” Porsche got a green light to take a bigger stake in VW.

The Stuttgart-based maker of high-end sports cars has spent $7.13 billion buying 31 percent of Volkswagen AG since 2005, with what analysts say is a view toward eventually acquiring it outright.

Porsche was forced by German law to file a formal offer in April after its holding in Volkswagen surpassed 29.9 percent, but the bid price was intentionally low, and the offer failed.

Since then Porsche CEO Wendelin Wiedeking has done little to dampen speculation about a takeover, saying last month that the company was mulling a larger stake.

Wiedeking was guarded Tuesday, saying only that “we obviously have a high interest in exercising our voting rights in full.” But he has also said that owning a majority stake in VW would help Porsche’s efforts to work with Europe’s biggest carmaker in developing new models, engines and other components.

If Porsche were to acquire Volkswagen, it would be a case of a smaller company gobbling up its larger partner.

Porsche sold 97,515 cars in the year ended July 31, with sales of $10.48 billion. Volkswagen — whose brands include Seat, Skoda, Audi and Lamborghini — sold 3.1 million cars in the first six months of 2007 and expects its sales for this year to top the 104.9 billion euros it reported in 2006.