What self-respecting billionaire wouldn’t want a Porsche 918 Spyder, a Bugatti Chiron and Lamborghini Centenario in their asset portfolio (a steal at roughly $6 million for the three)?
A combination of those brands could prove just as irresistible for less affluent investors, providing Volkswagen AG’s new chief executive Herbert Diess is bold enough to grasp the opportunity — and the Porsche and Piech families who control VW can be persuaded.
As part of a sweeping overhaul announced on Friday, VW said it would bundle Porsche, Bugatti, Bentley and probably Lamborghini eventually into a new internal product group called “Super Premium.” The idea is to strengthen decision-making and promote cooperation between brands with similar price brackets. Mass-market VW, Seat and Skoda are being grouped together too.
There’s no indication that VW plans to seek a separate stock-market listing for the Super Premium stable, unlike the VW trucks assets. But it would be foolish not to at least consider it. Look at Ferrari NV.
The Italian company’s 2015 IPO showed investors were willing to pay a hefty premium for autos that come with big price tags, a rich pedigree and plenty of horsepower. The shares trade on about 32 times estimated earnings, not far off Prada Spa and miles ahead of BMW AG and Mercedes-owning Daimler AG.
Thanks to the acquisitive habits of former chairman Ferdinand Piech — a man with “petrol in his blood” apparently — VW has lots of luxury marques. It was rumored Piech wanted to buy Ferrari too (VW investors doubtless wish he had).
So what might a “Super Premium AG” be worth? Oh, about 100 billion euros ($123 billion), give or take.
First, some caveats. VW doesn’t publish earnings data for Lamborghini or Bugatti, probably because neither was terribly profitable in the past. Bernstein Research once estimated Bugatti lost $6 million on each Veyron hypercar produced. Things could be about to change though. Lamborghini, which has about 1 billion euros of annual sales, is launching the Urus SUV this year and SUVs tend to be money-spinners. For its part, Bugatti has at least promised the Chiron will be profitable.
VW does reveal what Bentley makes and it’s not terribly impressive. Its operating margin was a meager 3 percent last year. Again, though, that should improve thanks to the new Bentayga SUV.
Still, even if you assume that these brands add glamour but contribute little to Super Premium’s earnings, the combined company could still be worth a ten-digit sum — more than VW’s market capitalization.
That’s because Porsche AG’s profit margins aren’t too far off Ferrari’s. Hence, it might have an enterprise value of about 109 billion euros if investors were willing to pay a similar multiple of earnings, according to a Bloomberg Intelligence calculation.
VW’s family owners don’t take as much interest in the share price as you might expect. They’re a proud bunch, though, and Ferrari’s success has made them look a little unimaginative. If next year’s trucks listing is a success, maybe Diess can persuade them to consider a sexier follow-up.