German carmakers Volkswagen AG and Porsche said Friday they had come closer to merging the two companies, with the supervisory boards of both companies approving certain agreement contracts between them.
The contracts set out the organizational, structural and legal details of the agreement which was first announced in May and which is hoped to be concluded in 2011.
Volkswagen announced that its board approved the contracts this morning, while Porsche released a statement after market close that its board had done so.
The next step of the process will be VW shareholders approving that VW take on a 49.9 percent stake in Porsche AG through the issuance of new shares. An extraordinary VW shareholder's meeting is planned for Dec. 3 to take a vote on that issue.
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"The creation of an integrated automotive group with ten strong brands follows a compelling industrial logic," VW, based in Wolfsburg, said in a statement.
"It represents a unique opportunity for Volkswagen and is in the best interests of all shareholders. Volkswagen will further expand its position as the leading global multibrand group with the inclusion of Porsche AG and the automobile trading business of Porsche Holding Salzburg."
Volkswagen, Europe's largest carmaker by sales, said last month it would take an initial 49.9 percent stake in Porsche AG, based in Stuttgart. VW said it expects to pay around €3.9 billion ($5.9 billion) for the stake.
Volkswagen has said it will then in turn buy Porsche SE, the holding company for Porsche AG, for about €3.55 billion starting in 2011.
Porsche said in its statement that it could close some negotiations its lenders now that the agreements had been approved.
"In this case, the existing Porsche SE credit line of €10.7 billion is replaced by a new credit line, which reaches a total of €8.5 billion," Porsche said.
"This sum is distributed across three tranches with terms of between two and three years, and it substantially reduces the interest burden of Porsche. All banks involved in the old credit lines are involved with the new ones with unchanged rates," Porsche said.
Shares of Volkswagen closed about 2 percent lower at €94.13, while Porsche Automobile Holding shares finished about 1 percent lower at €51.32.
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