Volkswagen Group has reached a preliminary framework agreement on the listing of Porsche, which may land on the capital market within this year

On February 22, local time, Volkswagen Group released news that the company is discussing with Porsche Auto Holdings about the potential IPO listing plan of its luxury brand Porsche. To this end, volkswagen group and Porsche Automotive Holding have negotiated a framework agreement that lays the foundation for a potential IPO at Porsche.

The conclusion of the framework agreement is also subject to the approval of the Volkswagen Group management and the Supervisory Board. No final decision has been taken at this time. Therefore, the content of the framework agreement is not yet the final version, and whether Porsche will be spun off and listed still needs to be approved by the senior management of both sides. Porsche Automotive Holdings also issued a statement. They said that even if the directors passed the resolution, the implementation of the transaction would still need to wait for further review.

The signing of the contract between volkswagen group and Porsche Holdings confirms the authenticity of Porsche's spin-off and listing plan. According to Bloomberg, although porsche listing has not exposed a specific timetable, it is likely to be listed in 2022.

Finance and Economics Network Auto contacted Porsche on the time of listing and other content, and the other party said that it would not respond to this matter for the time being.

Porsche Automotive HoldingS is the largest shareholder in the Volkswagen Group, with the former in the hands of the Porsche family and the Piëch family. The two families hold a 31.4% stake in the Volkswagen Group and, through Porsche Auto Holding, have a 53.3% voting interest in the Volkswagen Group.

Although the Volkswagen Group expressed caution in its statement, some media pointed out that Porsche's split listing was almost "inevitable". According to the German "Business Daily", the Volkswagen Supervisory Board is expected to pass a resolution in principle within a few days, which may start the preparations for Porsche's IPO. The newspaper quoted people familiar with the matter as saying that the matter was "ready to make a decision" and that major banks and law firms had begun to participate in the preparatory work. The split Porsche Company will have common and preferred shares, of which only 20%-30% of the common stock (without corporate voting rights) can be traded on the stock exchange, thus maintaining control of the luxury car brand by the Volkswagen Group and the Porsche and Piëch families behind it.

Bloomberg Intelligence expects Porsche to be valued at between €60 billion and €85 billion, while the entire Volkswagen Group is currently worth around €112 billion.

Boosted by the news, Volkswagen shares reversed their 3.9% decline in early trading, rushing 10% higher to 192.48 euros at one point.

As early as last year, Reuters quoted people familiar with the matter as saying that Volkswagen Group was promoting the spin-off and independent listing of its luxury brand Porsche to raise funds and help the group transform to intelligence and electrification. In addition, the German "Business Daily" also reported that the Porsche family and the Pierch family are considering selling some of their shares in Volkswagen to raise funds to support the Porsche IPO. German Manager Magazine reported that volkswagen group may put a price of 25% of Porsche's shares, estimated at 2.4 billion to 3 billion US dollars, in order to obtain the funds needed for electrification and intelligent transformation.

Speculation about the listing of Porsche has been mentioned several times in the media in the past year, but volkswagen group officials have not made a clear statement before, and Volkswagen GROUP CEO Herbert Diess said earlier this year that Porsche is not short of funds. He also said that although Volkswagen is evaluating the possibility of Porsche listing, expanding battery capacity is the company's top priority. He also said that the Group has been evaluating plans and projects that are conducive to the development and implementation of the company's strategy and increase the value of the company.

It is worth mentioning that volkswagen group has previously tried to promote the spin-off and sale of luxury brands Lamborghini and Ducati, but has not made more progress.

On February 22, Porsche China CEO Yan Boyu responded to the recent news that Porsche will be spun off and listed: "Porsche's good profitability gives Porsche a good valuation, but regarding the spin-off and listing, Volkswagen Group and Porsche Group need to jointly discuss and make decisions, and Porsche China is temporarily inconvenient to respond to this issue." ”

Hong Sheng, vice president and chief financial officer of Porsche China, further said that many new car-making forces may be listed in consideration of the lack of funds, while Porsche has maintained high profitability, with a return on sales of more than 15%.

In 2021, the global automotive industry is facing the challenge of lack of cores, and many automotive groups choose to allocate existing chips to high-margin models, so the sales of luxury brands represented by Porsche have been significantly boosted.

In 2021, the annual sales of the Porsche brand exceeded 300,000 units for the first time, reaching 301915 units, up 11% from 2020. In terms of models, the demand for SUV models remained the highest in 2021, with the Macan selling 88,362 units worldwide last year and the Cayenne selling 83,071 units; the all-electric Porsche Taycan selling 41,296 units, more than double the previous year's deliveries; the 911 model also reaching a new high, with annual deliveries of 38,464 units; the Panamera delivering 30,220 units; and the 718 Boxster and 718 Cayman deliveries were 20,502 units.

China remains Porsche's largest single market in the world. According to official data, Porsche China delivered 95,671 new cars in China in 2021, an increase of 8% year-on-year. For the seventh consecutive year, it became Porsche's largest market in the world. In terms of electrification, Porsche has introduced 16 pure electric and plug-in hybrid models to China, and Porsche electrified models will account for 18% of sales in 2021, an increase of 8 percentage points over the previous year. The Taycan, a Pure Electric Sports Car, delivered 7,315 porsches in China last year, with 72 percent of users buying Porsche brand models for the first time.

In the face of Tesla, Weilai, Gaohe and other new car-making forces, Yan Boyu believes that in the million-level electric vehicle market, Porsche has no competitors.

With the exception of the Chinese market, Porsche deliveries rose in all other markets on sale. Among them, the U.S. market in 2021 delivery volume rose 22% year-on-year to 70,025 units, while the overall sales volume in the Americas was 84,657 units, an increase of 22%; sales in the Chinese market increased by 8% year-on-year to a total of 95,671 units, while the total delivery volume in Asia-Pacific, Africa and the Middle East was 131098 units. Porsche's overall deliveries in Europe were 86,160 units, up 7% year-on-year, and 40% were plug-in hybrids or pure electric vehicles.

Porsche, which has significantly increased sales, has contributed significant profits to the parent company. According to Volkswagen Group's third-quarter earnings report, Porsche generated an operating profit of around €3.4 billion in the first nine months of 2021, representing approximately 34 percent of the operating profit of volkswagen's overall automotive business.

As the "cash cow" of the Volkswagen Group, Porsche's spin-off and listing will further contribute a large amount of cash needed for electrification and intelligent transformation to the Group. According to foreign media reports, the billions of dollars expected in earnings from Porsche's IPO will be mainly invested in the electric vehicle business, including the construction of 6 battery factories in Europe to challenge Tesla's dominance in this market.