Accelerate transformation and increase valuation, Volkswagen considers spin-off of Porsche
According to people familiar with the matter, the Volkswagen Group is considering spin-off and listing of its premium car brand, Porsche, and use the proceeds from the listing for acquisitions or technology investments. Some analysts believe that 'the transaction will become a strategic watershed, indicating that unprecedented drastic changes in the automotive industry have just begun.'
During the response to the global epidemic, the performance of established traditional car companies such as Volkswagen Group was much better than expected. They recently announced strong profits and abundant cash flow. However, compared with new automakers such as Tesla, the valuations of automobile groups such as Volkswagen are still low.
The CEO of Volkswagen Group Herbert Deiss has repeatedly emphasized in public that 'Volkswagen must transform as soon as possible.' In his view, the Volkswagen Group's spin-off of Porsche is not only a practice for accelerating transformation, but also a touchstone for exploring the possibility of future development.
'The loss of power due to low valuations is something that Diss has been complaining about before, and it is also a great disadvantage of Volkswagen Group.' Metzler Bank analyst Juergen Pieper (Juergen Pieper) ) To put it bluntly, 'Porsche’s initial public offering (IPO) will be a panacea to solve this problem.'
Porsche's appeal to investors is obvious. Bloomberg Intelligence analyst Michael Dean estimates that Volkswagen’s valuation may therefore reach 110 billion euros ($133 billion), which is about 20 billion euros higher than investors’ current valuation of Volkswagen.
However, it is not easy to conclude this transaction. Since becoming the CEO of Volkswagen Group in 2018, Diss has repeatedly tried to reorganize Volkswagen, but the company system has hindered his efforts. In fact, the major decisions of the Volkswagen Group must be approved by the shareholders of Porsche, the Piech family, and the German state of Lower Saxony (Lower Saxony tends to stand on the side of a powerful union), who dominate and often dispute.
Tesla’s rapid rise sends a clear signal to Diss: Active measures must be taken to turn the capital market’s attention to established automakers. Before Volkswagen chose to evaluate Porsche, Daimler had decided to spin off the truck division. Although its management had been opposed to the move before, Daimler’s stock price has risen by 13% since then, hovering at a high of nearly three years. point.
Investors are uncertain about the ability of traditional automakers to keep up with the 'new car-making forces'. In their view, new entrants are not bound by the huge production network centered on internal combustion engines. This week, Ford announced that it will achieve full electrification of its products in Europe by 2030, which to a certain extent reversed investors' views.
In the next five years, the Volkswagen Group plans to spend a large part of its 150 billion euros on electrification and software investments. Although the Volkswagen Group currently has strong earnings, it may incur huge costs due to the withdrawal of some of its businesses and become financially tight.
'Volkswagen’s current balance sheet may not be suitable to ensure that it accelerates investment in electric and autonomous vehicles, nor can it provide support for financing to further reduce legacy problems.' Jefferies analyst Philippe Houchois Said in the report.
