31 May 2001: The Volkswagen Group is considering selling shares in its Audi subsidiary as part of a strategy to protect the overall group from a hostile takeover bid. The move follows reports that the EU is examining special 'Volkswagen Laws' which hamper takeover bids by limiting any shareholder to a maximum 20% stake.

VW is attractive to such a bid because its capitalisation is small relative to its main competitors in the area, DaimlerChrysler and BMW. But selling off high-value shares in Audi alone would provide a 'poison pill' against any takeover bid, should the EU decree the 'Volkswagen Laws' in Lower Saxony to be anti-competition.

Audi accounted for 650,000 of the more than 5 million unit sales made by the group last year. Shares based on Audi alone would be of a higher value than those of the overall group, and their sales would beef up the company's capitalisation. VW also owns luxury brands Rolls Royce, Bentley, Lamborghini, and Bugatti.

One downside of Audi share sales would be a decrease in the group's overall profit. Other protection options include a share buyback, a capital increase or a share-swap alliance with a friendly company. VW bought back around 10 percent of its shares in 2000. TW