A $2 billion-plus lawsuit filed against family-controlled automobile giant Porsche was dismissed by a US federal judge on 30 December 2010.
Porsche was being sued by 39 hedge funds for lying over its intentions towards Volkswagen. Specifically, they claimed Porsche disguised its intentions to takeover VW at the end of 2008.
The funds claimed to have lost more than $2 billion when Porsche surprised markets in October 2008 by announcing it had acquired a majority share in VW and planned to takeover the much larger carmaker. (Continue reading here)
The case was dismissed because investors could not use the US legal system to claim for fraud if the shares had been purchased in foreign companies, according to court findings.
In a reversal of fortunes, Porsche's takeover bid eventually failed as the company accumulated a crippling €10 billion debt buying VW shares, leaving the smaller carmaker and its family head, Wolfgang Porsche, needing VW's help to survive.
The two car companies are now in the middle of a complex merger that saw VW pay €3.3 billion for a 49.9% share of Porsche at the end of 2009. The dismissal of the lawsuit should smooth the way for the merger, which is expected to be concluded by the end of this year.
Another bonus to the merger plans came on 2 January 2011 when VW's non-family chief executive, Martin Winterkorn, had his contract extended for a further five years. After being appointed CEO in 2007, his new contract will allow him to see the merger through.
Porsche and Volkswagen are owned by rival branches of the same family. Porsche is headed by Wolfgang Porsche and VW by Ferdinand Piech – both grandsons of Porsche's founder. While Porsche and Piech jointly own Porsche with 53.7% and 46.3% stake respectively, Piech has a 32.3% ownership of Volkswagen.
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