German luxury sports car maker Porsche said Sunday it plans to take a stake of about 20 percent in Volkswagen in a move that will help shield Europe's biggest carmaker from a hostile take-over.
"Porsche AG in Stuttgart plans to buy about 20 percent of the voting shares in Volkswagen AG in Wolfsburg," the company said in a statement.
"Porsche is taking this decision because Volkswagen is now not only an important development partner for Porsche, but also a significant supplier for approximately 30 percent of Porsche's sales volume."
Porsche has developed in partnership with VW the 4x4 vehicle Cayenne and is also collaborating on a hybrid motor.
"Making this investment, we seek to secure our business relations with Volkswagen and make a significant contribution to our own future plans on a lasting, long-term basis," Porsche managing director Wendelin Wiedeking said in the statement.
Sources put the value of the deal, which would make Porsche the largest single shareholder in VW, at about three billion euros (3.6 billion dollars).
The German state of Lower Saxony, which holds an 18.2-percent stake in VW's voting shares, welcomed the announcement in a statement as "a great opportunity for Germany as a carmaking country".
Porsche insisted that it had no plans to acquire Volkswagen, the world's fourth-largest car maker.
"The shares assumed will not under any circumstances reach the threshold at which Porsche would be required to submit a public bid for the take-over of Volkswagen," the company said.
Porsche's move is aimed at protecting VW from a potential hostile take-over, made more likely with the anticipated lifting of the so-called Volkswagen law, which shields the car maker from hostile take-overs.
Porsche said it expected the law to be wiped from the books with a ruling by the European Court of Justice in early 2007.
"Our planned investment is the strategic answer to this risk," Wiedeking said in the statement.
"We wish in this way to ensure the independence of the Volkswagen Group in our own interest. This 'German solution' we are seeking is an essential prerequisite for stable development of the Volkswagen Group and, accordingly, for continuing our co-operation in the interest of both companies."
Porsche said that it would be able to finance the deal through its own liquidity and that its supervisory board had approved the investment.
The announcement came after speculation that US billionaire Kirk Kerkorian, a Las Vegas hotel magnate, was looking to buy into Volkswagen. The rumours drove up the price of VW shares Thursday.
Facing intense competition and losing market share with an aging model range, VW has been implementing a cost-cutting plan that could see the car maker shed thousands of jobs.
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