FRANKFURT (AFP) — German sports car maker Porsche cleared a major hurdle Wednesday in its bid to acquire Volkswagen when the European Union's executive commission gave its backing to the deal.
"After examining the operation, the commission concluded that the transaction would not significantly impede effective competition," Europe's top anti-trust watchdog said in a statement.
Porsche has said since early March that it planned to take over VW, Europe's biggest automaker, and has been waiting for the approval of various competition authorities.
"The commission's examination of the transaction showed that horizontal overlaps between Volkswagen and Porsche are limited and that, for all car segments concerned, Porsche will continue to face several strong, effective competitors," the EU regulator said.
A Porsche spokesman "welcomed" the commission ruling.
But he noted that Porsche had sought approval from competition authorities in 20 countries.
"We have already received several positive responses and are very confident," he told AFP, adding that "the process would likely be wrapped up in October."
The EU cleared the way for Porsche to raise its stake in VW to more than 50 percent, a goal that could be attained within a few months.
Porsche already owns more than 30 percent of VW's capital and has secured access to shares that would increase its stake to 36 percent to satisfy a requirement set by the EU commission.
The commission holds that it is essential to reach this level to ensure Porsche could get proposals passed during VW general assemblies.
But the takeover overture, launched in late 2005, is far from a done deal.
The idea that the biggest European car company and its 329,000 workers could be taken over by the much smaller Porsche has some in Germany grinding their teeth.
The state of Lower Saxony, where VW is based, owns around 20 percent of the group's equity and benefits from a 1960 law that grants it a minority blocking position at that level.
Investors generally need to own at least 25 percent of a company in order to block strategic decisions such as plant relocations.
But the "VW Law," which is also defended by Germany's federal government, was struck down in October by the European Court of Justice, which ruled that it violated competition laws.
Porsche regularly criticises the law as well, saying it was time that VW become a "normal company."
But while Berlin has redrafted the legislation to respond to EU objections, it maintained the provision that gives Lower Saxony an effective veto over strategic VW decisions.
VW posted sales of 109 billion euros (179 billion dollars) in 2007, while Porsche, which employs 11,600 workers, reported sales of seven billion euros in its 2006-2007 fiscal year.
The IG Metall trade union fears a Porsche takeover would lead to job cuts at German VW plants, despite assurances that Porsche it is a long-term investor in the auto giant.
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