Another deal of some significance

It has been announced that Qatar Holding LLC, the investment arm of the Arab country’s sovereign wealth fund, has confirmed that it will be participating in a $7 billion capital increase in Porsche to help the car company reduce its debt load. Shareholders who provide money for this will increase their stake in the business as the expense of those who choose not to take part. Qatar Holding considers the merger between Volkswagen and Porsche to be beneficial to be beneficial to all those involved and will thus increase its 17 percent of Volkswagen and 10 percent of Porsche, thus becoming a more powerful force within the company when the merger finally goes ahead.

This is interesting in that Volkswagen-Porsche is still considering an involvement in Formula 1 in the future, after the new 2013 engine regulations are introduced. At the same time the Williams F1 team continue to strengthen its links with Qatar. There is little doubt that the ultimately goal in this would be for the team to be funded by Qatar with engines coming from Volkswagen-Porsche.

What might also be interesting to the Qataris is the possibility of buying into the Grove team, as the Bahrainis have with McLaren and Abu Dhabi did with Ferrari (although that stake has since be bought back by the Italians). There have been rumours of the sale of more Williams shares ever since Toto Wolff bought 10 percent of the team (and options for more) at the end of 2009, which meant that the shares in the team were split 63 percent for Frank Williams, 27 percent for Patrick Head and 10 percent for Wolff. The options would allow for Wolff to increase his shareholding to 49 percent. If that were to happen Williams would have 35.7 percent and Head 15.3 percent, but the pair would still have control of the company as Williams and Head almost certainly have shareholder agreements to always vote together, in much the same way as Ron Dennis and Mansour Ojjeh have at McLaren. Wolff may choose to sell his shares to others if he feels that he can make a profit – and Qatar would be a good place to look for a buyer.

26 thoughts on “Another deal of some significance

  1. I think i have this wrong, but i’ll suggest it anyhow:

    Porsche bought a whole lot of OTC calls on VW stock.

    There’s only a few percent of VW stock in circulation, so any big buy order pushed it up.

    Whilst this was private, all was Hunky Dory for Porsche. They were secretly upping the price all on their own. en borrowing against that imaginary gain, to buy actual VW shares, which just upped the whole thing.

    But, even for billions in margin, over the closest held stock, they pushed it too far. It was suddenly all of their profit. They had to live or die by the trade. Pity, as they just had their act together on the usual car making front.

    They created a squeeze, but ran out of cash to roll over the premia the moment someone worked out VW should be shorted hard.

    I think Quatar took the other side of some of Porsche’s position.

    Maybe Quatar played both sides.

    Nice touch, if you can get it.

    – – –

    Simon Benedict,

    it’s a messy story. Not sure you can dive in without confusion.

    – – –

    I still think Peach did something here, for old rivalry reasons. He wasn’t the favored son, but he certainly is the consummate motor exec.

    I think ZeroHedge has some good stuff on this, going back, or try FT Alphaville.

    – j

  2. Joe,

    such a deal would obviously make sense for Williams. It is the best way to secure long term resources needed to become a top team again. The current tie ups with, Porsche through Wolff and the kers system and with the Quatari through the R&D center are very smart moves for someone who wants to go into that direction. However, what are the signs that Williams will actually manage to pull this off? To convince Volkswagen one needs to convince Ferdinand Peich. He has never shown much interest for F1 and only recently said it wasn’t an option for the Volkswagen group.

  3. Just a thought, a little technical:

    Market Capitalization is usually the value only of the shares publicly traded.

    The MarCap of VW, at the height of the Porsche heist, was nigh 300 Billion Euro.

    For just 5%.

    I may be just quoting the float, but i’ll accept my patent stupidity if my inaccurate numbers will have some impression.

    The sheer scale of real companies gets me sitting down.

    We have this huge, wonderful world, companies bigger than Nations, and yet in so much of our genetic minds, we still act like smallholders, tilling our tithed porcels of land for our Patron.

    If you have kids out there, please make them wise to this!

    Trying a bit beyond my usual skills, but if The Floyd said “all you touch, all you see, is all you’ll ever be”, then there is someone expoliting that truism. Stuff politicks, do business, make things people want, make ’em good, THEN, hold who you want close.

    I am likely wrong, but then i am just sussing this out as i go.

    – j

  4. Well, if it’s Porsche rather than Volkswagen that is going to be buying into FW’s team, I guess we can kiss the dream of Bentley Williams F1 goodbye (not that it was ever terribly realistic in the first place).

    They’ll keep Audi as the LMP brand, and run as Porsche in F1, surely.

  5. I am trying to determine which of the two “John”s (if in fact they aren’t really the same person) is the more annoying? I am leaning toward the “other John” based on his habit of amending his previous posts, but the original “John” was quite fond of long double diatribes with the footnotes and corrections included in the original post. So, really, it’s a toss up at this point. Let’s vote…….

  6. Porsche have intimated that F1 may be too difficult for them, and prefer the easier option of more Le Mans.

  7. As holders of the world’s massive fortunes, sovereign wealth funds are going to be cropping up more frequently. I’m sure that Bernie is working on a way to involve more of them.

  8. Why did Wolff buy shares in Williams in the first place? Aside from possibly being able to sell them to a buyer in the future and getting a nice fat profit, what does he gain? The team hasn’t won a race since 2004, and has been tooling around in the mid-field for years on end. And they’ve not renewed the contract of a very promising rookie and have instead signed someone purely for the sponsors he provides (seemingly). It doesn’t appear to be a huge money-making opportunity (unless what Joe says comes to pass, and the Qatari people make an investment and bring VW on board).

    If I were someone wanting to invest in F1, I’d look somewhere other than Williams.

  9. I question what this means for Patrick and Sir Frank. The team is at a low point in their history. Why sell now unless they’re desperate for cash to spend themselves, or build up the team, or finally can’t see their situation turning around?

  10. Ash,

    the Bentley going racing thing was just rather conveninent when VW found itself short changed by BMW. Those were AUDI boys. If there were some racing types at Bentley in those years, they were racing to the bar, in their new fangled “gentlemen’s” clubs. The real spirit was a rough and ready graft. I kid you not, i asked one chap about whether the racing era meant something still, and instead got a half hour lecture as to how gun turrets are put in the back of (not sure if it was) an Arnage. Not quite what i was interested in, anyhow. Lovely bloke, mind you.

    “Bentley (BMW-)Williams” in that combination, really would be an Ass. Possible, but doubt it will breed.

    Still, if there are born racers with not much to do about VW, they should go to FW and talk.

    Maybe that bit of silly history is the only thing holding anyone back.

    – j

  11. Karen,

    Porsche were tapped out. They lost. They are now just another arm of the ultimate multi – marque car company. Ford tried standardized platforms and multiple historic names. Failed. Toyota should concentrate on being Toyota, i think. Renault, making waves in the ROW. Porsche are just a division of VW. All because they thought they could own VW.

    I don’t get how you don’t see that if Bentley did LM, it was AUDI, and Porsche are probably being hopeful that AUDI will lend them a design too, or running interference. That may be people trying to keep their jobs by begging favors from their new masters. Porsche were not talking about racing before they hocked themselves to VW, were they?

    I think you can tell what my guess is, for the marque who will eventually roll up to the grid in F1!

    – j

  12. Lon,

    I posted as “John” originally. Anyone can put any name they like.

    (I’ve never bothered with blogs which require long registrations, they don’t seem to work very well.)

    Then, suddenly, there was someone else called “John”.

    This happened the same way on another blog, which is a work thing. Essentially, *I* could not tell whether this John who wasn’t me, was pulling a joke, or just riffing off my line of thinking. I had to double – take i hadn’t posted something i forgot about!

    So, I changed my headline from “John” to “Other John”, because it was all harmless and a bit amusing.

    I’ll keep using “Other John” in case the other John comes back. I don’t think he gave any thought to putting his name there, in terms of who else has the same name, who would? so becoming the other john was meant well, not to tread on whoever’s toes.

    Cripes, any more of this and someone will say i’ve gone stir crazy! But really, it’s simple.

    Possibly, the software Joe uses for this blog could identify my registered IP address, and he could reverse it at RIPE, and get my home address. But that is a bit much to ask.

    Another way might be to notice my odd hours.

    I am not posing as two Johns!

    – – –

    I took a moment to reply for a few reasons:

    1. Obviously i’ve no rights to any particular name
    2. Joe isn’t responsible to inspect papers!
    3. Realized my style of writing has changed in small ways.
    4. How can I improve to not annoy you?

    1 & 2 are obvious.

    3,

    all those footnotes were me trying to suss a bundle of papers about the trademarks which really weren’t very helpful of themselves.

    3 and a half.

    I realized that my prose was lousy. So I dropped back a bit and figured i should stop with the purely technical, because my thinking is clearer when i am a bit more personal. This is probably a temporary thing, because there are limits.

    3 and 3/4,

    Hasn’t gone down well, so I’m open to suggestions.

    4, coming to that.

    – – –

    4 matters a lot more to me. I know I am a bit annoying. Have you met any ad salesman who won’t gob off? šŸ™‚

    Maybe i shall be saved by being absorbed by the Fernandes thing, get back to being technical and dry.

    The point is, that to write unbiased words really does require a lot of thought. Far more than i’ve managed.

    I’ve got hooked on Joe’s blog, no doubt about it. I think that’s for good reasons, but also i should filter out my personal reasons, it’s just that Joe keeps filling in the blanks which seem to affect me really directly. That is not meant as a backhanded compliment, it’s just what i experience.

    Lon, if there’s anything I can change to be less annoying, please speak up. Maybe the solution is to be dry and technical again. This isn’t my soap box. But you were right about my diatribes. Where’s this country i am supposed to be dictating?! Anyhow, not here.

    Final thought: I do indulge in flights of fancy in any correspondence, because i think writing should be enjoyable, but i have not bent any truths. If i ever manage to do something of note, in the real world, i will then be happier to give you my name. I just didn’t think that mattered much, the name, i mean.

    Absolute last thought: about me being annoying, I’m sorry for that. I’ll work on it.

    – john k

  13. allen,

    good call. I forgot F2 started up again.

    I wonder how much Williams tech we might be driving on the road in a few years.

    In my ramblings above, I omitted Honda and Mazda. I didn’t mean to forget them, i like their cars a lot, but i was talking about giants. I also omitted GM, may they rest in governmental peace.

    To be historically correct, VW is not the first successful multi – marque company. GM were the very first, overtook Ford by understanding individual preferences.

    Sloan spent the last years of his life dictating a stunning book describing what he thought about business. Not called the “Sloan School” [of management] for nothing. But that means little until you read him, and i don’t think what MBA students think of Sloan is what he thought, at all . Really shockingly interesting, but not as shocking as how few have read it.

    Can’t think why this isn’t out of copyright, but

    a taster:

    Click to access Alfred%20P%20Sloan%20-%20My%20Years%20with%20GM.pdf

    and where to get a real copy:

    http://www.abebooks.com/servlet/SearchResults?isbn=0385042353

    Please also consider “A Ghost’s Memoir” for the bloke who put Sloan’s words down. It’s equally fascinating.

    – john k

  14. Tangui,

    about Peach: he’s a lunatic, and lunitcally smart. Moreover he seems to be back in charge, after a bit of a holiday, and he does things rather fast.

    Correct, VW haven’t exactly said anything much about F1. But the fact they’ve said anything at all, is a strong signal.

    Oh, well, sorry, just explaining my bets:)

    – john k

  15. Frank really is sorting out his team.

    It’s the smartest news.

    Now on any search for breaking events.

    I’ll buy some shares just on principle.

    – john k

  16. Oops,

    Money quote, via Sky:

    “Mr Parr said that the team had received interest from “a major car manufacturer and the odd oligarch and so forth” but that a public listing was seen as the best option to maintain its independence.”

    Sweet!

  17. Maintaining independence is all very well, but Ron and Mansour have ridden the manufacturer wave perfectly, and been left with a legacy they couldn’t have built without it.

    Frank has driven away every world champion he’s ever had, and Newey, and at least one engine manufacturer.

    And look where it’s got him…

  18. Upon reflection I can only see the stories about floating Williams as an effort by Patrick and Frank to pressure any wealth funds to come in now. They said rather vaguely that it is something that is on the cards in the future and will be discussed if/when they sort it out. But this seems to be more of a passing idea. Were they do really believe in floating they would have sat down and drawn up real plans before announcing. So I can only deduce that they are exerting soft pressure for Qatar or whoever to come and make an offer now, as Frank and Patrick are not getting any wealthier in the current situation.

    I’d guess they are probably trying to get a good deal, but that cannot be done until the discussions start. The only way for them to really save the jobs of the people on the shop floor is to get a Wealth fund as an owner as market supplied income will certainly not be enough for Williams to turn around their investments.

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