VW AG to spin off Audi ???
05-25-2001, 04:24 AM
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Hmmm...
How would spinning off Audi create a poison pill for a takeover? It sounds like that would make VAG weaker (therefore more prone to a buyout), which is not exactly a posion pill.
Considering that Audi generates 1/4 of VAG's revenue and operating profit (while certainly producing far less than 1/4 of VAG's cars) it would seem that Audi could do quite well on its own, management issues aside. Perhaps management would improve with Audi as a stand alone if some of the faces change, as is almost inevitible during a restructure.
Considering that Audi generates 1/4 of VAG's revenue and operating profit (while certainly producing far less than 1/4 of VAG's cars) it would seem that Audi could do quite well on its own, management issues aside. Perhaps management would improve with Audi as a stand alone if some of the faces change, as is almost inevitible during a restructure.
05-25-2001, 04:39 AM
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Poison pill might work like this.
VW has all papers in place to do a spin off in case of hostile takeover attempt. Presumably the management of this new entity would be friendly to VW.
1. Dilute shares. If they spun off Audi they would issue new Audi shares to VW shareholders. At the same time they could issue new shares to raise money that could be used by Audi to buy more VW shares and fight the takeover.
2. Unsweeten the deal. If Audi is not part of VW it is less attractive. Who knows what technology and assets would be transferred to the new company?
3. Create a place for VW management to go post takeover.
1. Dilute shares. If they spun off Audi they would issue new Audi shares to VW shareholders. At the same time they could issue new shares to raise money that could be used by Audi to buy more VW shares and fight the takeover.
2. Unsweeten the deal. If Audi is not part of VW it is less attractive. Who knows what technology and assets would be transferred to the new company?
3. Create a place for VW management to go post takeover.
05-25-2001, 04:41 AM
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You're correct, if its weaker it's also prone, but in a takeover you're looking for ...
the most valuable assets
So from a financial standpoint, by spinning off Audi it would provide little incentive for a company to attempt a takeover of VW, because one of the most profitable components is no longer contributing to its success
So from a financial standpoint, by spinning off Audi it would provide little incentive for a company to attempt a takeover of VW, because one of the most profitable components is no longer contributing to its success
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05-25-2001, 05:32 AM
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Yep, you're right. Although I don't know why they called it a poison pill, since...
...I've usually heard that used in a different sense; i.e., something that would make it difficult to make changes to the business once someone takes it over. Like putting large layoff compensation packages into the contract, so should the new owner decide they want to make personnel changes they will be out a big load of cash. This doesn't necessarily weaken the company as it exists, but could discourage a takeover. Spinning off Audi would weaken VAG.
It will be interesting to see how this plays out.
It will be interesting to see how this plays out.