Porsche and Volkswagen to form an integrated automotive group

The Supervisory board of Porsche Automobil Holding SE (Porsche SE) has approved a Basic Agreement negotiated by the management boards of Porsche SE and Volkswagen AG, the workers’ representatives of both companies and the Porsche SE ordinary shareholders, describing the path to foundation of an integrated car group.

The Supervisory Board of Porsche SE has also appointed, with effect from 15 September 2009, Prof. Dr Martin Winterkorn as CEO and Hans Dieter Pötsch as CFO of the company. They will exercise these tasks in addition to their functions as members of the Board of Management of Volkswagen AG. The CEO of Dr. Ing. h.c. F. Porsche AG, Michael Macht, who is also a member of the Board of Management of Porsche SE, shall also be appointed into the top management of Volkswagen AG.

The Basic Agreement provides for the following steps:

* Shareholding of 42% of Volkswagen in Dr. Ing. h.c. F. Porsche AG, the 100% subsidiary of Porsche SE. The shareholding will be provided by way of a cash capital increase with an expected total return of approximately up to 3,3 bn. EUR based on an enterprise value of Porsche AG of 12,4 bn. EUR.

* A cash capital increase of Volkswagen AG taking place in the first half-year of 2010 against issuance of new preference shares. The capital increase will be approved by Porsche SE.

* Volkswagen grants an option to the shareholders of Porsche Gesellschaft m.b.H., Salzburg, to sell the operative sales and distribution business of the company to Volkswagen.

* Cash capital increase of Porsche SE most probably taking place in the first half-year of 2011 against issuance of new ordinary and preference shares, granting preemptive rights for ordinary shareholders on ordinary and preemptive rights for preference shareholders on preference shares. The ordinary shareholders of Porsche SE will approve the capital increase.

* The following changes of the articles of association of Volkswagen will be proposed to the next shareholders meeting of Volkswagen:
1. The state of Lower Saxony shall be entitled as a shareholder of Volkswagen to appoint two members of the supervisory board, as long as the state of Lower Saxony maintains a shareholding in the ordinary shares of Volkswagen of at least 15%. The implementation of such Appointment Right in the articles of association has the effect that Porsche SE will no longer include Volkswagen AG by way of full consolidation in its consolidated financial statements.
2. Confirmation of the section of the articles of association providing that shareholders’ resolutions, requiring a majority of 75% of the capital represented in the shareholders’ meeting pursuant to the German Stock Corporations Act, require a majority of more than 80% of the capital represented in the shareholders’ meeting.

* Agreement that, until 2020, Porsche SE will not enter into a domination and profit and loss transfer agreement with Volkswagen AG.

* Joint purpose of a merger of Porsche SE into Volkswagen AG during 2011, if at that time the legal requirements for a merger are met.

* If a merger will not take place: put option for Porsche SE and call option for Volkswagen AG to sell and to purchase, respectively, the remaining shareholding of Porsche SE in Porsche AG; the purchase price is calculated according to the same parameters as applied for the valuation of Porsche SE for purposes of the capital increase.

Condition precedents for closing of this agreement include particularly approval by the consortium banks of Porsche SE and final clarification of remaining structural issues.

Separately, on Friday August 14, in a festive ceremony, Porsche SE and Qatar Holding LLC (QH) signed an agreement signaling the entry of the Emirate of Qatar into the Porsche SE family. In the afternoon, the Chairman of the Supervisory Board of Porsche SE, Dr Wolfgang Porsche, welcomed the high-ranking delegation from Qatar led by Prime Minister of the Emirate, Sheikh Hamad bin Jassim bin Jabr Al-Thani, to the historical Porsche Villa located on Killesberg Hill outside of Stuttgart. There, in the presence of the Minister President of Baden-Württemberg, Günther Oettinger, the two men signed two contractual agreements.

The Prime Minister of the Emirate of Qatar signed the purchase agreement with which Qatar will acquire 10 per cent of the ordinary shares of Porsche SE. As spokespersons for the family shareholders, Dr Wolfgang Porsche and HansMichel Piëch also signed the agreement. The second agreement, which provides for the takeover by the Emirate of a major share in the cash-settled options relating to Volkswagen shares, was signed by Ahmad Al Sayed, CEO of Qatar Holding, and Chairman of the Executive Board of Porsche AG, Michael Macht, as well as his Deputy Chairman, Thomas Edig, who are both members of the Executive Board of Porsche SE.

Dr Wolfgang Porsche gave the Emirate of Qatar a warm welcome as a new member of the Porsche shareholder family and declared: “Today is a historic day for us. For the first time in the history of Porsche, an external investor has acquired a holding of ordinary shares that so far have been solely owned by the family members of Porsche and Piëch.”

The Porsche and Piëch families have expressly welcomed the decision of the Emirate to become a shareholder in the company and, at the same time, to take on a major holding in the options to VW ordinary shares held by Porsche. “This will not only improve the liquidity situation of Porsche, but it is also an important step on the pre-destined road to an integrated automobile company, which we intend to forge together with Volkswagen,” explained Dr Porsche.

Sheikh Hamad bin Jassim bin Jabr Al-Thani emphasised that Qatar considers itself a strategic investor which has great interest in the long-term positive development of Porsche. “Porsche ranks among the most valuable automobile brands in the world. We are proud to be a part of this sports car manufacturer and its rich tradition and history. Through our trust-based collaboration with the family shareholders, we will help ensure that the success story of Porsche, and, in the future, of Volkswagen continues to be written,” explained the Prime Minister.

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