volkswagen porscheVolkswagen AG (ETR:VOW) (FRA:VOW) seems to have got itself a sweet deal by finally acquiring Porsche Automobil Holding SE (ETR:PAH3) (FRA:PAH3) for 3.88 billion euros plus a share of future dividends and other benefits and one common share. The deal sets the VW group firmly on track to becoming the largest auto-maker on the planet by 2018. VW cherry-picked its way through Porsche, buying only its manufacturing assets and having nothing to do with the litigation-laden Porsche SE holding. En route to the acquisition, the two companies avoided 1.5 billion in taxes by using the simple stratagem of including just one common share in the consideration. With the exchequer now getting only a measly 100 million euros through transaction levies, German politicians are up in arms against the transaction saying the taxpayers are being taken for a ride as global players exploit loopholes.

The merger will generate savings of 700 million euros every year, boosting VW’s earnings by over 9 billion euros, while the Porsche operations would become debt-free.

VW gets itself a top-class manufacturing and design outfit in Porsche boasting of an 18 percent profit margin and whose sales are already running at record levels with capacity appearing to be the only constraint.

“We’re wrapping up one of the most significant projects in the automotive world,” VW Chief Executive Martin Winterkorn said on the occasion. “Together we are more capable than ever of becoming the best auto company on the planet,” he said.

The business will become effective August 1 and immediate plans for the merged company include a release in 2014 of the Macan compact SUV and the assembly of some Porsche cars in VW’s own plants. The acquisition will help VW augment its position in countries such as Russia, China and Latin America, where it already has a strong presence. It is already bolstering its operations in the U.S.A and Mexico with new plants.

According to the MarketingWeek, Dr. Martin Winterkorn 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.”