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| Porsche loses suit over VW |
| Bloomberg / New Delhi Nov 28, 2008, 01:04 IST |
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Porsche SE’s bid to take over Volkswagen AG was dealt a potential setback when a German court refused to strike down rules in VW’s charter that protect the German state of Lower Saxony’s voting rights.
The court in Hanover, Germany, rejected a Porsche suit that sought to overturn a Volkswagen corporate rule that gives shareholders with a 20 percent stake the power to block major company decisions. Presiding Judge Reinhard Saathoff criticized Porsche’s effort to compare the case to a European Union court ruling on a German law that provides the same voting rights.
A company charter and a national law “aren’t the same and we cannot treat them the same,” Saathoff said today. “If Porsche would interpret a ruling of my court as it did interpret the EU court ruling, I would be pretty mad.”
Porsche is trying to get rid of the protections that favor Lower Saxony, which owns 20.1 percent of VW stock, as it proceeds with its plan to take control of Europe’s largest carmaker. The European Court of Justice last year ordered Germany to modify the country’s so-called Volkswagen law that gave Lower Saxony special rights.
Porsche argues the EU ruling forces Volkswagen to delete the 20 percent veto rights from the charter. The German court today further granted a request by Lower Saxony to delete two VW charter provisions, a concession by the German state in light of last year’s EU court decision. Lower Saxony will no longer have two guaranteed board seats in the charter, and a limitation of voting rights of shareholders to 20 percent regardless of the actual stake will be dropped.
Today’s cases centered on this year’s annual VW shareholder meeting, where both Porsche and Lower Saxony tried to adapt the corporate charter according to their readings of the EU court ruling. Porsche wanted to get rid of the guaranteed seat, the voting limitations and the veto right. Lower Saxony sought to delete the guaranteed seat and the voting limitations.
Both companies’ motions failed to get majority support at the meeting and both filed suits. The court today said Porsche violated its duties as a Volkswagen shareholder when it didn’t vote for Lower Saxony’s plan.
“The ruling is incomprehensible to us,” said Dirk Erat, a spokesman for Stuttgart, Germany-based Porsche. “Porsche will study the verdict in full and appeal.”
“Today’s ruling is a 100 percent victory for us,” Lower Saxony Finance Minister Hartmut Moellring said. “We could have had this result without the costs of a lawsuit, which fortunately we don’t have to bear now.”
Peik von Bestenbostel, a spokesman for Wolfsburg, German- based Volkswagen, declined to comment.
The court sent another part of Porsche’s suit, seeking to annul the rules, to a court in Braunschweig, Germany, which may have to rule again on the issue.
Shareholders of German corporations who own 25 percent plus one share can block major decisions, including charter amendments. The required percentage for the veto rights can be changed by shareholders in the charter. At Volkswagen, the percentage was set by both the German law and the charter.
Porsche said last month that it holds shares and options equal to a 74.1 percent stake in Volkswagen. The company said yesterday that while it’s “increasingly unlikely” the stake will surpass 50 percent this year, it will take control as soon as possible and is committed to owning 75 percent before 2010.
Porsche rose 2.51 euros, or 4.8 per cent, to 55 euros as of 1:105 pm in Frankfurt. The stock has dropped 60 per cent this year. Volkswagen rose 0.7 per cent to 296 euros.
The German federal government is siding with Lower Saxony, claiming that the EU court ruling forced Germany only to drop Lower Saxony’s guaranteed board seats and the limitation on voting rights.
A new version of the Volkswagen law which kept the veto rights at 20 percent hasn’t won over EU Internal Markets Commissioner Charlie McCreevy , who has threatened to take the issue back to court.
Germany today received a final warning from EU regulators that they will sue to overturn state veto power at Volkswagen, a move that aids . The European Commission in Brussels said it’s a step away from taking the German government back to court for failing to modify the Volkswagen law as ordered by EU judges more than a year ago.
The Volkswagen charter was approved in 1960 when the federal and state governments held 100 percent of the company before it went public. Porsche claims the charter rule is void because the shareholders were forced to keep it under the Volkswagen law.
Today’s cases are 21 O 61ô08 and 21 O 52/08 at the Hanover Regional Court.
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