A full merger of the two automotive brands has been on the cards since Volkswagen took a 49.9% stake in the luxury car marque in 2009. The prospect of a large tax bill for both and a number of legal obstacles had held the deal back.
Porsche will receive £3.57bn and a single common VW share. The new business will come into effect from 1 August.
Dr. Martin Winterkorn, chairman of the board of management of Volkswagen, says: “The unique Porsche brand will now become an integral part of the Volkswagen Group. That is good for Volkswagen, good for Porsche and good for Germany as an industrial location.
“Combining their operating business will make Volkswagen and Porsche even stronger – both financially and strategically – going forward. We can now cooperate even more closely and jointly leverage new growth opportunities in the high-margin premium segment through targeted investments in pioneering products and technologies.
Porsche had tried to takeover VW in 2009 but failed to gain the 75% shares needed and accrued significant debts in the process.