Porsche rejects Volkswagen merger

FRANKFURT - Porsche, the heavily indebted maker of German luxury sports cars, has rejected a merger offer by Volkswagen, Europe's biggest car maker.

In the event of a merger, a credit worth $23.9 billion agreed to by a consortium of banks in favour of Porsche would have to be renegotiated "right away," a spokesman said.

A report at the weekend that VW had presented a merger proposition to Porsche which would proceed via cross shareholdings, with VW taking a stake of 49.9 per cent in Porsche. Porsche owns 51 per cent of the shares in VW.

Relations between the two car makers have deteriorated in recent weeks, as well as between the owners of Porsche - the Porsche and Piech families.

Ferdinand Piech, head of the VW supervisory board, and his cousin Wolfgang Porsche disagree on how to get Porsche out of the financial dead-end it finds itself in since buying a majority of VW's shares.

The move was in large part responsible for Porsche's debt of around $19.5 billion. Piech would like to merge the two companies, while Wolfgang Porsche backs the head of Porsche, Wendelin Wiedeking, who wants to keep his company independent.

Talks with the Gulf state of Qatar on taking a stake in Porsche were aimed at doing that, and are "in the final stretch", Porsche said.

But no decision has been reached on how Qatar might make its investment. Among the three main possibilities are a direct investment in Porsche, the purchase of VW stock options held by Porsche, "or else both", he said.

- AAP