Porsche says delay to VW merger now more likely

Date: Thursday, February 24, 2011
Author: Victoria Bryan, Reuters

* Probe of shares manipulation taking longer than expected

* Prosecutors see probe lasting into 2012

* Porsche cuts chance of merger completing within schedule (Updates with Porsche statement)

FRANKFURT, Feb 23 (Reuters) - Porsche's (PSHG_p.DE) absorption into Volkswagen (VOWG_p.DE) this year is now more likely to be delayed because of investigations into two former managers, the sports car maker said late on Wednesday.

The public prosecutor's office in Stuttgart informed Porsche that a probe into allegations of share price manipulation was taking longer than expected and would not be completed until the start of 2012 at the earliest.

Volkswagen had hoped to fold Porsche into its operations in 2011.

The delay to the probe means the legal and tax assessments required to be made under the merger agreement will also be delayed and has reduced to just 50-50 the chance that the merger can be achieved in 2011, Porsche said.

"From the management board's view this also reduces the probability that the merger can be achieved under the timeline of the basic agreement from previous 70 percent to 50 percent," it said in a statement.

Earlier, German media had reported that prosecutors had dropped part of an investigation into former Porsche Chief Executive Wendelin Wiedeking and former chief financial officer Holger Haerter, but were opening up a new line of enquiry.

Under Wiedeking, Porsche quietly bought nearly all the freely traded ordinary shares of Volkswagen as part of a 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.

Leaving Porsche saddled with debt, the takeover attempt backfired and meant Porsche had to turn to VW for help.

Porsche had said late last year that the merger could be delayed because of tax and legal issues. [ID:nLDE69I0ME]

A senior Porsche family member had sounded a more confident note after a U.S. judge dismissed a hedge fund lawsuit, however, thereby removing one key obstacle.