Find below an update on Porsche AG’s potential IPO.
The structure mentioned in the latest announcement makes sense.
If we assume that Porsche AG might be priced at a 70% discount to RACE IM (10.3x EV/EBIT 22E), PAH3 would end up controlling (direct + indirect) 58% of Porsche’s AG voting rights (See section 3 and 4 below).
However, to finance the acquisition of the 12.5% stake in Porsche Ordinary shares, PAH3 will need to sell 26.2m VOW shares (calculations based on a 10% discount to VOW current price and post PAH3 pro-rata of the Special dividend, See Section 4 for detailed calculations).
How could PAH3 place so many VOW shares?
Indeed, VOW GY’s average daily traded volume in the past 3 months is 57K when PAH3 would need to place 26.2m shares (using our assumptions below).
Could PAH3 sell part or all of the shares to a strategic partner? QIA for example?
In our opinion, this IPO will have different impacts on the various entities:
- VOW GY:
- If PAH3 places the shares they need to sell in the market, this will significantly increase VOW’s liquidity
- The IPO will crystallise the value of Porsche AG despite the Ords not being listed
- Porsche AG will remain consolidated, and the analysts are very likely to use the Pref price as a reference
- VOW is trading on 4.5x EV/EBIT 22E and we still believe the IPO will provide a catalyst for a significant rerating
- The key question is whether the market will somehow apply a discount to the Porsche AG Ords as there are not listed. This would make sense but PAH3 agreed to pay a 7.5% premium to the Pref and VOW Ord which are listed but illiquid are trading at a 28% premium to the Pref…
- PAH3 GY:
- PAH3 should profit from VOW’s rerating (which should still represent approx.. 80% of its NAV post IPO, See section 5 for SOPs Pre and Post IPO) so we are still positive on the long PAH3
- However, PAH3 would buy unlisted Porsche AG’s Ord shares and the same issue (as for VOW) of whether the Porsche AG Ords will be valued by the market at a discount to the Prefs applies
- PAH3 used to have 99% of its assets in VOW and will now have approx. 16% of its NAV in unlisted Porsche AG Ords
- According to our calculations, as of today, the holding discount post IPO would be around 22% which seems too tight (we are applying a 20% discount to Porsche AG Ords)
1/ Recent disclosures
PAH3 and VOW confirmed discussions on a potential IPO of Porsche AG and provided further details tonight:
- Porsche AG capital to be divided in 50% Pref shares and 50% Ord shares
- 25% of Porsche AG’s Pref Shares to be placed during IPO
- PAH3 to acquire 25% + 1 share of Porsche AG Ord shares at a 7.5% premium to Porsche AG’s Pref share’s placement price
- 49% of the total proceeds (IPO of Pref shares + sale of Ord shares) to be distributed to shareholders
- During today’s conference call, VOW CEO mentioned the IPO could happen as early as Q4 2022. A progress update will be made in Late summer 2022
We assume that Porsche AG’s Pref shares will have no vote.
2/ Expected structure of Porsche AG’s capital
3/ PAH3’s control of Porsche AG
We are assuming at this stage that Porsche AG is IPOed debt free as we have no details.
We present below the implied PAH3’s control over Porsche AG based on various Porsche AG’s discounts to RACE IM’s EV/EBIT multiple.
We are assuming that PAH3 would place VOW shares at a 10% discount to current share price (See section 4).
4/ Detailed calculations
Find below our calculations on the potential Porsche AG’s IPO and impact for PAH3.
Find below VOW’s capital pre and post Porsche AG’s IPO.
5/ PAH3’s holding discount
We make the following assumptions for our PAH3 SOP post Porsche AG’s IPO:
- An equity value of €57bn for Porsche AG
- PAH3’s acquisition of a 12.5% stake (Ords) in Porsche AG (we apply a 20% discount as Ords won’t be listed)
- PAH3 would pay €7.6bn for the stake but receive €2.3bn in special dividend which means they only have to finance €5.3bn
- The €5.3bn would be finance by selling placing/selling 26.2m VOW shares at a 10% discount
- As we already used the special dividend for financing the Porsche AG stake acquisition, we use VOW ex price to calculate the value of PAH3’s VOW remaining stake (26.1% capital and 44.4% voting rights)
Find below the PAH3 historical discount to NAV.
6/ Extracts from various press releases
Extracts from press releases from Feb 22nd, 2022
VOW’s comments :
- “Volkswagen AG and Porsche Automobil Holding SE are currently in advanced discussions regarding a potential IPO of Dr. Ing. h.c. F. Porsche AG”
- “For this purpose, Volkswagen AG and Porsche Automobil Holding SE negotiated a Framework Agreement which should form the basis for further steps in the preparation of a potential IPO of Dr. Ing. h.c. F. Porsche AG”
PAH3’s comments :
- “Porsche Automobil Holding SE (the "Company") confirms that it is currently in advanced discussions with VOLKSWAGEN AKTIENGESELLSCHAFT regarding cornerstones of a possible IPO of Dr. Ing. h.c. F. Porsche AG ("Porsche AG")”
- “The transaction could also include the acquisition of ordinary shares (Stammaktien) of Porsche AG by the Company”
Latest statement attached