UPDATE 3-Porsche board to meet on $7 billion capital rise

* Underwriters set rights issue at 38 euros/share-Porsche

* Porsche board plans to meet March 27 on capital rise

* Porsche says board to approve 38 euros/share March 27

* Ordinary shareholders indicate consent on 38 euros/share

* To raise around 5 billion euros in equity capital
(Releads with Porsche confirmation)

By Philipp Halstrick and Edward Taylor

FRANKFURT, March 25 (Reuters) – Debt-laden German carmaker
Porsche (PSHG_p.DE: Quote, Profile, Research) is set to approve this Sunday details of
implementing a 5 billion euro ($7.1 billion) capital increase,
clearing the way for a merger with Volkswagen AG (VOWG_p.DE: Quote, Profile, Research).

“The executive board and the supervisory board of Porsche
SE have not yet resolved on the subscription price and the
details of the implementation of the capital increase. Such
decision is planned for Sunday, 27 March 2011,” it said in a
written statement late on Friday.

“A syndicate of banks has today undertaken vis-a-vis
Porsche SE, under certain conditions, to underwrite all new
ordinary and preferred shares to be issued in connection with
the implementation of the capital increase …,” it said.

It said the banks will offer the new shares at a
subscription price of 38 euros per share.

Porsche’s statement came after sources familiar with the
preparations told Reuters the company would implement the
capital increase in the next few days.

Porsche Automobil Holding SE (PSHG_p.DE: Quote, Profile, Research) only earns
investment income from stakes in Porsche AG sports cars and
Volkswagen (VOWG_p.DE: Quote, Profile, Research) and needs fresh equity before being
folded into Europe’s biggest carmaker.

The underwriters of the mammoth issue are Deutsche Bank AG
(DBKGn.DE: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) and other banks could
still join the syndicate, the sources said.

The two banks declined comment.

The sources said the capital increase would raise a total
of 2.5 billion euros from the Piech and Porsche families, as
well as Qatar, all of whom hold ordinary shares.

The Piech and Porsche families will provide 2.25 billion
euros between them, while 250 million euros will come from
Qatar, the sources said.

The rest of the 2.5 billion euros will be from owners of
preferred shares, they said, adding that, if the amount falls
below that figure, Qatar might also subscribe to the preferred
shares, even though it has not committed to do so.

“This step has already been approved. The capital increase
will start in the next coming days,” according to one person
familiar with the preparations.

Porsche SE finance chief Hans Dieter Poetsch said last week
that Porsche wanted to be an attractive investment in itself
and shareholders subscribing to the capital increase would
already get a payout in June, since the new shares would have
full dividend rights for the shortened fiscal year that ended
in December. [ID:nLDE72G0MI]

Poetsch has acknowledged events in Japan and the Middle
East meant it was not an ideal time to tap equity markets in
the next month or two.

Volkswagen chief executive Martin Winterkorn, who also
serves as CEO of Porsche SE, said two weeks ago that
preparations for the holding’s planned 5 billion euro ($6.9
billion) capital increase in the first half of this year to pay
down debt were “fully on schedule.” [ID:nLDE7290NJ]

Porsche SE has net debts of 6.3 billion euros.
($1=.7062 euros)
(Additional Reporting from Alexander Huebner, Hendrik
Sackmann and Arno Schuetze; writing by Marilyn Gerlach; editing
by Greg Mahlich and Andre Grenon)

UPDATE 3-Porsche board to meet on $7 billion capital rise