Porsche reveals details of major capital increase

Debt-laden German carmaker Porsche SE has approved an almost €5 billion ($7 billion) capital increase, clearing the way for a merger with Volkswagen, the group said late on Sunday.

Porsche said it had fixed the subscription price for the new ordinary and preferred shares - which will have dividend rights as of August 1, 2010 - at €38 apiece, and the subscription ratio at 1:0.75.

The company's share capital will be increased by up to €131 million, to up to €306m through the issuance of 65.6m new ordinary shares and the same amount of new preferred shares.

Each share will have no par-value representing a notional amount of €1 in the share capital, the company said.

The subscription price will enable investors to buy shares at a significant discount to their current market price. At market close on Friday, Porsche SE's shares, which have lost around 5.8 per cent year-to-date, were trading at just over €56 apiece.

The carmaker added that it expects the public offering to be approved by German financial watchdog BaFin on March 28. The subscription period for the new shares is then due to last from March 30 until April 12.

Provided that the new shares are fully subscribed, Porsche will raise net proceeds of about €4.89bn, which will be channeled into the repayment of liabilities.

All new ordinary shares will be underwritten by Deutsche Bank, the group said. All new preferred shares will be underwritten by a banking syndicate led by Deutsche Bank, JP Morgan and Morgan Stanley.

Porsche SE finance chief Hans Dieter Poetsch said last week that Porsche wanted to be an attractive investment in itself and shareholders subscribing to the capital increase would get a payout in June, since the new shares would have full dividend rights for the shortened fiscal year that ended in December.

Poetsch has acknowledged, however, that events in Japan and the Middle East meant it was not an ideal time to tap equity markets in the next month or two.

Porsche SE has net debts of around €6.3bn. It currently earns investment income only from stakes in Porsche AG sports cars and Volkswagen and needs fresh equity before being folded into Europe's biggest carmaker.