VW keeps options open for luxury-car IPO

Bloomberg

Volkswagen AG Chief Financial Officer Frank Witter was asked this week whether the world’s largest carmaker would be open to selling shares in the luxury-car unit that includes Porsche and Lamborghini.
He didn’t say no to the option, which could potentially unlock billions of dollars in value for Volkswagen investors.
“It is a legitimate question, without a doubt,” Witter said Wednesday, speaking in a Bloomberg Intelligence webinar for investors and analysts in London. The focus for now is preparing Volkswagen’s heavy-trucks division for a potential IPO, and making the German manufacturer’s 12 automotive brands to work together more efficiently, to boost profit margins and “unleash the potential we have,” he said. “Every other consideration might be down the road, but it’s currently not a priority the management is working on.”
Volkswagen raked in record sales and revenue last year despite wrestling with the fallout from its diesel-emissions crisis. Its stock is down 19 percent this year, and the company’s market value has languished at $78 billion. Prospects for the auto sector remain clouded amid developing trade wars and a looming industry shift toward electric vehicles and new digital services.
Any concrete step towards a partial separation of the high-margin luxury brands that generate some 60 percent of group profit might provide an even bigger catalyst. Earnings multiples for more specialised manufacturers such as supercar maker Ferrari NV and truck manufacturer Volvo AB are substantially higher than for diversified conglomerates like VW or German rival
Daimler AG. British sportscar maker Aston Martin last week announced plans for an IPO in London.
New Chief Executive Officer Herbert Diess has taken steps that could pave the way for structural changes.
VW plans to shift Lamborghini from the Audi unit to Porsche to forge a so-called “super-premium” brand group that also includes Bentley and Bugatti. That division alone could be valued at more than 120 billion euros, according to Bloomberg Intelligence senior analyst Michael Dean, almost twice the current valuation of the entire group.
VW’s complex shareholder structure in the past has limited management’s ability to push through deeper reforms. Early deliberations over a possible sale of the Ducati motorbike brand were shot down last year by key stakeholders.
But the German manufacturer has been making progress towards a possible sale of a minority stake in the heavy-trucks division Traton, and the timing of the project remains on track, Witter said.