(Bloomberg) —
Finally.
This sums up how Volkswagen investors seem to be reacting to Europe’s biggest carmaker announcing it’s preparing an initial public offering of Porsche. Speculation that VW would list its most lucrative asset has been swirling for years, but progress toward this actually taking place sent preference shares rising the most since December. The stock is adding to those gains Wednesday.
The IPO could come as soon as the second half of the year, people familiar with the deliberations told my colleagues Christoph Rauwald and Monica Raymunt. Bloomberg Intelligence estimates Porsche could be worth as much as 85 billion euros ($96 billion), generating significant value for shareholders thanks to top-tier margins and popular electric offerings.
The initiative is code-named “Phoenix,” the people said, a nod to the immortal bird in Greek mythology that regenerates and rises from the ashes of its predecessor. That’s pretty fitting, since the powerful Porsche-Piech family that partly controls VW more than a decade ago tried to have Porsche take over the far-larger manufacturer, only for VW to then turn the tables and gobble up the maker of the 911 sports car.
The move to set Porsche free again is a sign of the upheaval that has gripped the auto industry as it speeds toward electrification. Several carmakers and parts suppliers are considering structural shake-ups to excite investors.
Ford is looking at ways to separate its EV operations from the company’s legacy internal combustion engine business, Bloomberg reported last week. Daimler spun off its trucks business last year to allow Mercedes-Benz to better focus on electrifying its passenger cars. Aptiv has undergone a dramatic reinvention since the auto supplier spun off by pre-bankruptcy General Motors went through its own restructuring. It’s emerged as a Wall Street darling positioned to support electrification and advanced driver assistance systems.
VW Chief Executive Officer Herbert Diess has tried for years to untangle the company’s convoluted conglomerate structure, arguing a lack of agility is impeding efforts to catch up with and eventually bypass Tesla on EVs, software and self-driving technology.
Diess created considerable excitement last March by detailing a massive EV and battery-making push, but those efforts have sputtered somewhat. VW has had a tough time sourcing enough semiconductors, which has hampered output. On the electric front, the Tesla Model 3 and Renault Zoe both outsold VW’s ID.3 and ID.4 models in Europe last year.
On top of that, the IPO of VW’s Traton truckmaking unit fizzled largely due to infighting and a limited free float, while an attempt to separate the Lamborghini supercar and Ducati motorcycle brands didn’t pass muster.
Porsche presents a golden opportunity for Diess to change the narrative. The division sold more cars than ever in 2021, with sales of the fully electric Taycan more than doubling and overtaking the iconic 911 for the first time. The brand will have five versions of the Taycan on offer from mid-March and plans to introduce a battery-powered version of the Macan compact SUV in 2023.
Of course, a Porsche IPO won’t be a walk in the park. VW’s 20-member supervisory board is composed of factions notorious for conflicting interests. Worker representatives, who account for half the seats, are often aligned with two officials from the German state of Lower Saxony who tend to want to protect jobs. Pleasing the powerful Porsche-Piech clan while making sure that losing its prime asset won’t turn VW into a “bad bank” of sorts will be a difficult tightrope for Diess to walk.
For the time being, at least, the advanced negotiations VW and its top investor are having are reason for optimism.
“We think a Porsche IPO, which has been a hot topic of discussion for years, is now more of a possibility of actually happening than ever before,” RBC analyst Tom Narayan said in a note.
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