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VW mulls takeover shield
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May 25, 2001: 2:57 a.m. ET
Europe's largest carmaker may spin-off Audi if 'Volkswagen Law' goes
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LONDON (CNN) - Europe's largest carmaker Volkswagen may spin-off its premium Audi brand as a shield against a future takeover, a report said on Friday.
VW is considering the option as the European Commission wants to remove Germany's 40-year-old "Volkwagen Law" that has protected the company from being bought by a rival, The Wall Street Journal reported.
Volkswagen Chairman Ferdinand Piech is taking the possibility of a future takeover attempt seriously, partly because VW's share price (VOW) is cheap, the report said.
Piech is considering a number of steps to improve the share price to ward off an unwelcome advance, including spinning off a major chunk of Audi, which accounts for nearly a quarter of VW's revenue and operating profit.
An Audi spin-off "is something that could be used as a poison pill in the event of an attack," the report said, citing a person familiar with the company's thinking.
The "Volkswagen Law", enacted especially for the company, has limited any investor from holding more than 20 percent of VW's voting rights.
That is the amount held by the company's largest shareholder, the state of Lower Saxony, where VW is based and has extensive manufacturing operations.
The state has been a largely passive investor, more concerned with preserving jobs than profits, the report said.
According to the WSJ, the statute has caught the eye of European Union officials in Brussels, who in trying to liberalize financial markets, oppose legal provisions that hinder takeovers.
The European Commission, the executive body of the EU, said earlier this month that it is studying whether to force Germany to rescind the measure protecting VW. 
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