Court ruling opens VW to Porsche takeover

European Court of Justice finds Germany's "Volkswagen Law" to protect hostile takeovers invalid, too restrictive of capital movement.

A German statute known as the "Volkswagen Law" was struck down Tuesday by the European Court of Justice, opening the door for sports car maker Porsche to acquire the German automaker.

The ruling means that Porsche, which has expressed an interest in making Volkswagen a rival to Toyota in terms of global sales, can now proceed.

Porsche already owns a significant amount of shares in Volkswagen. It's now free to continue buying up VW stock, increase its voting share, become the majority owner and take control of the company.

"With a voting interest of just above 30 percent in Volkswagen, we obviously have a high interest in exercising our voting rights in full," Porsche CEO Wendelin Wiedeking said in a statement.

Specifically, the German law had restricted voting rights of a board member to 20 percent, regardless of the actual percentage of shares owned, and required an 80 percent majority vote to pass resolutions instead of the usual 75 percent required for public companies.

The European Court of Justice ruling on the "Volkswagen Law" (PDF) struck down both those restrictions, as well as one involving German governmental control over a company's board.

The court ruling was not a surprise, as it followed the opinion released by Advocate General Ruiz-Jarabo last February.

"Ruiz-Jarabo considers that the German government's approach is too wide and too far removed from reality, and is not based on overriding reasons relating to the public interest. Accordingly, the advocate general proposes that the Court of Justice should find against Germany," Ruiz-Jarabo said in a February 2007 statement (PDF).

About the author

In a software-driven world, it's easy to forget about the nuts and bolts. Whether it's cars, robots, personal gadgetry or industrial machines, Candace Lombardi examines the moving parts that keep our world rotating. A journalist who divides her time between the United States and the United Kingdom, Lombardi has written about technology for the sites of The New York Times, CNET, USA Today, MSN, ZDNet, Silicon.com, and GameSpot. She is a member of the CNET Blog Network and is not a current employee of CNET.

 

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