FRANKFURT - Any deal to sell Porsche SE's sportscar business to Volkswagen could be scuppered by potential tax liabilities, a German newspaper reported on Monday, knocking shares in the two German companies.
Sueddeutsche Zeitung cited sources close to Porsche's supervisory board as saying taxes of 3 billion euros ($4.3 billion) that would go along with any takeover could become a dealbreaker.
Porsche and Volkswagen declined to comment on the report.
Volkswagen's ordinary shares were down 9.2 percent to 227.03 euros by 1117 GMT, making them the biggest decliners on the German blue-chip index .GDAXI, while Porsche fell 7.9 percent to 47.80 euros on fears its debt problem may not be solved.
There have been reports the Porsche family that controls a majority of Porsche SE will cave in to demands by rival family shareholder Ferdinand Piech to reduce the company's crushing debt by sacking chief executive Wendelin Wiedeking and selling the sportscar unit, Porsche AG, to Volkswagen
Porsche, along with labour leader and deputy board member Uwe Hueck, has repeatedly denied reports that Wiedeking was negotiating for a severance package of over 100 million euros and a successor for his post as head of Porsche AG has been found.
The Sueddeutsche came ahead of board meetings at both companies in Stuttgart on Thursday that could determine the future of the two carmakers.
Three billion euros is quite a bit of money and could put the entire business structure in question, a Frankfurt-based trader said.
German magazine Der Spiegel reported over the weekend that the Porsche and Piech families would agree on Thursday to accept an offer by Volkswagen to buy Porsche AG for roughly 8 billion euros.
Volkswagen would purchase a 49.9 percent stake in Porsche AG and at a later date acquire the rest, in a deal that would create an integrated automotive group with 10 brands under the leadership of the Wolfsburg-based carmaker and its chairman, Ferdinand Piech.
Porsche SE needs to dig itself out of a debt hole and strengthen its negotiating position after its efforts to seize full control of VW -- Europe's biggest carmaker -- failed, leaving it with a stake of nearly 51 percent.
But the Porsche and Piech families -- which control all the voting shares at Porsche SE -- have been at loggerheads for months over how to resolve its debt woes and the role Volkswagen would play in the whole deal.
The sale of Porsche AG would help Porsche SE pay off most of its debt, which German daily Bild reported had risen to 14 billion euros, citing an informed source.
A spokesman for Porsche denied the Bild report: The figure is wrong.
Porsche has also been in talks on a deal with Qatar that would give the Gulf state a 20 percent stake in Volkswagen via derivative contracts.
A fully debt financed purchase of Porsche AG and (family owned auto dealer group) Porsche Holding GmbH for a total of 11 billion euros by VW, if true, would obviously be detrimental for VW's rating in the absence of any Qatar involvement (capital increase, call options), said UniCredit credit analyst Sven Kreitmair. (Reporting by Maria Sheahan, Edward Taylor, Christiaan Hetzner and Tyler Sitte; Editing by Dan Lalor) ($1 = 0.7063 euro)