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

Date: Wednesday, January 26, 2011
Author: Shane McGinley, arabuanBusiness.com

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.