Industry Report: Volkswagen to Sell Block of Shares to Arab State

Worlds Fifth Largest Automaker Attractive Prospect to Abu Dhabi

With cars like the Phaeton and Touareg in its lineup, Volkswagen is starting to attract the likes of Abu Dhabi Sheikhs. Or maybe the automakers Bentley, Bugatti and Lamborghini divisions have caught the attention of the Arab elite.

Either way, Volkswagen and Abu Dhabi came to an agreement on Thursday that the Gulf emirate would be acquiring a significant stake in the German automaker, possible up to 10 percent.

"We agree on everything that we jointly have in mind in terms of investment and joint economic activity," commented Sheikh Hamed bin Zayed al Nahyan, Abu Dhabis economics minister, to a scrum of reporters covering the historic event at the carmakers Wolfsburg, Germany headquarters.

Although interrupted by a bomb threat at the Wolfsburg rail station, VW and Abu Dhabi still managed to iron out a deal that will see the state-owned Mubadala Development Co., Volkswagen and an unnamed Saudi investor purchase LeasePlan, Europes most popular car fleet-management firm, from Dutch bank ABN Amro for a total of $2.4 billion. When all is said and done, LeasePlan will be among Volkswagens largest acquisitions. The company manages approximately 1.2 million vehicles in Europe, and achieved a net profit of 193 million euros ($234,100,642) in 2003.

While most outsiders will see the deal as comprising odd partners, it actually makes a lot of sense to Volkswagen. Abu Dhabis VW stake-holding will not only fund a 50-percent share of LeasePlan, but more importantly give the automaker an active ally during a time when opposing forces are pressuring Berlin to throw out anti-takeover defenses at Volkswagen. Say what? What it comes down to is the European Commission has been looking like it will be kyboshing a law which gives Volkswagens home state of Lower Saxony effective control of the company with a voting stake of only 20 percent. This arrangement goes back to just after World War II, when Lower Saxony took partial ownership so that the automaker could be recapitalized - it was just previously controlled by Hitlers Nazi Party. Lower Saxony may sell Abu Dhabi a block of its shares.