Porsche, the luxury sports car and sports utility vehicle maker announced in a statement that it had bought 14.4 million Volkswagen shares raising its stake by 4.9 per cent to above 35 per cent, which gives it effective control of Europe's largest carmaker.
With this increased stake, Volkswagen has now become a subsidiary of Porsche Automobil Holding, thus giving it a control through a voting majority at VW general meetings.
By German law, as part of the new shareholding structure, Porsche will now be required to submit a formal offer to buy Audi, a Volkswagen subsidiary.
Porsche will make an offer at a minimum price of about € 487 per share valued at € 170 million based on last Monday's closing price for the approximately 370,000 Audi shares which are publicly traded.
Volkswagen, which owns 99.14 per cent of Audi shares, has said it would not accept Porsche's mandatory offer.
Porsche had started buying Volkswagen shares in September 2005 in order to acquire a majority stake in its largest supplier.
Since then Porsche has been battling with the government of Lower Saxony in Germany, Volkswagen'[s second-largest investor with 20-per cent stake, over management control as German law stipulates an 80-per cent majority shareholder vote to make major changes in Volkswagen.
The European Commissions is planning to take the German federal government to the European Court of Justice for a repeal of the "VW law" that gives Lower Saxony a blocking vote, which infringes European Union's competition law.
In an effort to raise its stake in VW to more than 50 per cent in the future, Porsche CEO Wendelin Wiedeking said "Today's step is a further milestone on the way.''
"We see Audi as an integral part of VW group and have no interest in taking the company out of the group," he added.
Wiedeking said he hoped for a quick solution to the conflict between Porsche and VW's unions who have been fighting over inadequate representation in the board by announcing that Volkswagen employee representatives will have seats on both Porsche Automobil Holding's employee council and supervisory boards.