Porsche Mulls Buying a Stake in Troubled Battery Maker Varta

(Bloomberg) — Porsche AG is considering taking a stake in Varta AG, according to people familiar, as the embattled battery producer weighs options to restructure its debt. 

The German luxury-car maker aims to take a majority stake in Varta’s e-mobility battery unit as well as a minority interest in the entire group, said the people, who asked not to be named as the matter is private. Porsche confirmed it was open to taking a larger role in Varta’s restructuring “to keep this key technology in Germany.”

Porsche has been pursuing its own strategy on batteries to supplement the plans of parent Volkswagen AG. This includes building high-performance cells through its Cellforce venture, while the manufacturer last year also detailed plans for a €3.3 billion ($3.6 billion) site where it’s seeking financial and strategic partners.

Varta is currently weighing two proposals for a financial restructuring with creditors and potential investors, the firm said in a statement Sunday. These include Porsche, a company controlled by Austrian entrepreneur and majority shareholder Michael Tojner as well as other interested parties, it said.

All potential restructuring options for Varta aim to inject a “high two-digit million euro amount” of fresh funds into the business, the company said. Both proposals would entail a delisting of Varta’s shares and certain creditor groups would also see a “significant” debt haircut, the statement said. 

Shares in Varta fell 80% early Monday in Frankfurt and was down 63% at 11:34 a.m. The earlier move took €350 million off the company’s valuation. Varta’s roots date back more than 130 years and include battery performance tests in extreme cold during a 19th century north pole expedition. It currently employs about 4,200 people. 

The battery maker has been in talks with creditors after it failed to recover following a debt restructuring last year. The company has been struggling with a slump in demand in its core markets as well as the impact from a cyberattack in February. 

Potential Deals

One potential proposal to stabilize Varta is a new investment of €100 million, the people said, which would wipe out existing shareholders. Majority owner Tojner confirmed he’d stand to lose his current equity stake in Varta.

Banks would lose half of their claims — over €485 million — as part of the rescue operation, said the people, who added that Switzerland-based Montana Tech Components, run by Tojner, is also preparing financial support.

Varta is also considering a restructuring deal put forward by existing creditors, according to a separate person familiar with the negotiations. Under this plan, lenders would be given the option to participate in any new debt or equity financing, the person said.

Discussions for a rescue deal are at an advanced stage, according to a spokesperson. 

Earlier this month, Porsche and Varta announced a cooperation on the e-mobility subsidiary — which produces lithium-ion cells that can be used in electric vehicles — prompting its shares to surge. 

Porsche is being advised by Herter & Co and law firm Flick Gocke Schaumburg, while the holders of Schuldscheins — German promissory notes —  are working with Dentons, according to people familiar. Varta is working with Grub Brugger and DLA Piper alongside financial advisor Rothschild and Tojner is working with Clifford Chance and fwp, the people added.  

Germany’s Frankfurter Allgemeine Zeitung first reported Porsche’s potential wider role in Varta.  

–With assistance from Monica Raymunt.

(Updates with statement from majority shareholder in ninth paragraph, Varta in 11th paragraph)

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