One of the world's largest sovereign wealth funds, Norway’s $325 billion oil fund, has written to Volskwagen AG expressing its "deep concern" about the Porsche merger saying the deal favors the Porsche and Piech families which together own 51 percent of VW. 

Norges ranks as the seventh largest owner of VW, with an investment of approximately EUR270 million as at the end of 2008. In a letter from Anne Kvam, head of Corporate Governance of Norges Bank Investment Management, to VW supervisory board head, board members and Porsche stakeholder Ferdinand Piech (VW's former chief executive), the fund states that the benefits for VW shareholders from the deal are unclear and the available information doesn't "assure us that conflicts of interests have been handled satisfactorily."

In NBIM's view the planned deal "leaves the impression of being designed to suit the needs of the Porsche controlling families at the expense of Volkswagen and its non-controlling owners."  It also accuses VW's board of a lack of transparency and conflicts of interest regarding the deal as it doesn't see enough reasons "for Volkswagen to assist the Porsche and Piech families by buying out their privately held automobile trading business of Porsche Holding Salzburg."

"We call on Volkswagen to cancel plans for buying those assets unless it shows the means by which it determined the price and demonstrates that the acquisition has particular strategic value," the letter says. The fund also criticises the terms of the deal saying the market believes Volkswagen is paying a rich price for those assets at a time when "Porsche is more in need of a transaction than Volkswagen." The fund urges the VW board to explain whether the deal means that the Europe's largest car maker will assume part responsibility for Porsche's debt.

Speaking to Reuters this week about NBIM's increasing activism, Anna Kvam, head of corporate governance at said that the fund was determined to improve the rights of minority shareholders and raise standards of corporate governance and sustainability in the firms it owns.

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Norges Letter to VW >>