Volkswagen (VW) (VOWG.DE) and Porsche (PSHG_p.DE) have broadly agreed on details for a deal to combine two of Europe's most storied automakers, two VW supervisory board members told Reuters on Wednesday.
VW, Europe's largest carmaker, is set to buy a stake of up to 49 percent in Porsche AG, the sports car unit of family-owned Porsche Automobil Holding SE, the first step in creating what VW has called an integrated automotive group by the end of 2011.
Questions over valuation have been resolved, one of the board members said.
The partial sale of Porsche's sports car business, which analysts have valued at between 8 billion and 11 billion euros, is set to be decided at a VW supervisory board meeting on Thursday.
Porsche SE needs to repair its stretched balance sheet after its attempt at a debt-financed buyout of VW, Europe's largest carmaker, backfired.
Porsche, which owns a stake of just above 50 percent in VW voting shares and swap contracts to control around 20 percent VW stake, was forced to abandon its stakebuilding earlier this year and negotiate a merger instead.
Stuttgart-based Porsche ousted its chief executive, Wendelin Wiedeking, in July and is working to pay down a debt pile of more than 10 billion euros ($14.13 billion).
The combined entity could eventually be called Auto Union, and may be led by VW Chief Executive Martin Winterkorn.
Winterkorn has given assurances that Porsche would remain an independent brand -- it would be the tenth -- in the VW group, just like premium carmaker Audi.
The amount VW will pay for Porsche could be adjusted following detailed due dilligence, said sources close to VW.
The combined company would generate more than 120 billion euros in pro-forma revenue from the sale of nearly 6.4 million vehicles, based on figures from the carmakers' past fiscal years.
At the same time as the VW-Porsche negotiations, the Gulf state of Qatar is set to buy Porsche's package of derivatives, which are worth about 5 billion euros, a step designed to alleviate Porsche SE's debt.
The deal to sell the derivatives, which can be converted into a 17 percent stake in Volkswagen, is almost home and dry, a banker familiar with the matter said.
Porsche's controlling families have already approved plans for a capital increase of at least 5 billion euros, involving ordinary and preferred shares.
Porsche could sell some voting shares to Qatar as part of the capital increase, people familiar with the deal said. It remained unclear whether Qatar would take voting shares in Porsche, in Volkswagen, or in both.
Porsche has said it expected a pretax loss of up to 5 billion euros due to writedowns on the value of Volkswagen stock hedges for the fiscal year ended July 31.
VW's home state of Lower Saxony is expected to retain its blocking minority stake. ($1=.7079 Euro) (Reporting by Arno Schuetze, Hendrik Sackmann and Philipp Halstrick; writing by Edward Taylor; editing by Karen Foster)