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Volkswagen Shareholders Approve Plan To Raise Capital To Finance Porsche Deal - Update

Thursday, shareholders of German carmaker Volkswagen AG (VLKAF.PK) overwhelmingly approved a plan to issue up to 135 million new non-voting preferred bearer shares, providing the financing structure to help its merger with luxury sport car maker Porsche AG and pave the way for the creation of an integrated automotive group.

The company said 98.73% of shareholders present at the extraordinary General Meeting in Hamburg, approved the proposal that paved the way for the capital increase, planned for the first half of 2010.

The capital framework, which is valid until December 2014, is expected to provide Volkswagen the financial flexibility needed to grow the integrated automotive group and also ensures appropriate liquidity and a healthy financing structure.

Approval of the proposed capital increase is also expected to help in creating an integrated automotive group in several stages. Volkswagen said, in the coming week it will take a 49.9% stake in Porsche AG.

In 2011, Volkswagen intends to acquire the trading business of Porsche Holding Salzburg. The creation of the integrated automotive group is then to conclude in 2011 with the merger of Volkswagen AG and Porsche SE.

The company said that the combination of Volkswagen and Porsche, with ten group brands, will realize significant additional growth potential and lead to higher profits for the new group and create added value for Volkswagen shareholders.

Porsche initially tried to acquire Volkswagen, but it ran out of funding as credit markets turned sour. Porsche's debt rose to more than 10 billion euros following the failed bid for Volkswagen. With Porsche having failed in its attempt, Volkswagen is buying the indebted Porsche group.

Volkswagen shareholders also granted Lower Saxony the right to appoint two supervisory-board members as long as it directly or indirectly holds at least 15% of the company's ordinary shares.

In addition, resolutions by the General Meeting that are required by law to be adopted by a qualified majority will continue to require a majority of more than 80% of the share capital represented when the resolution is adopted.

Hans Michel Piëch and Ferdinand Oliver Porsche, who have been members of the Supervisory Board since their appointment in August by the courts, were elected as members of the Supervisory Board, in each case for a full term of office.

VLKAF.PK closed Thursday's regular trading session at $123.50.

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