Prestige automaker Porsche will increase its stake in Volkswagen AG, maker of the Beetle, Golf and Jetta, in a move aimed at keeping the company firmly in German hands.

However, the the German maker of high-performance cars like the 911 and Boxster said it does not want majority control of Europe's largest automaker.

Stuttgart-based Porsche AG said it would increase its stake in Volkswagen from 27.3 per cent to 31 per cent in the next week, a move that legally obliges it to make a mandatory takeover offer for the company.

But, said spokesman, Michael Baumann, Porsche will only offer the legal minimum US$134.50 per Volkswagen share, lower than the US$156.86 it closed at in Frankfurt trading on Friday — and it is unlikely that any VW shareholder would agree to the lower price.

"We do not expect many Volkswagen shareholders to offer us their shares," he said. "Which means simply that we intend to go to 31 per cent. We do not by any means intend to take over."

The offer is set to take place on Monday. German law requires that the takeover offer only be made once, not that it succeed, Baumann said.

The next threshold for a mandatory takeover is 50 per cent. At 31 per cent, Porsche will be Volkswagen's largest shareholder followed only by the German state of Lower Saxony, which holds 20.3 percent.

Porsche's move was not unexpected and analysts and markets had expected something similar to it. In its statement, Porsche said it was seeking the larger stake as a response to fears that European Union judges will force the German government to repeal its law blocking a foreign takeover of Volkswagen, which is partly owned by the state of Lower Saxony and is looked to as both an industrial powerhouse and a major provider of jobs.

It cited the February 13 opinion of EU Advocate General Damaso Ruiz-Jarabo Colomer, who said the German government's regulation that limits any shareholder's voting rights to 20 per cent was "not based on overriding reasons relating to the public interest."

The EU took Germany to court over the issue in 2005; the advocate's opinions are not binding on EU judges but the union's highest court follows them roughly 80 per cent of the time.

Porsche said it assumed "that the European Court of Justice would confirm the invalidity of the VW law and so cause the German government to change or abolish this law."

Porsche plans to form a new holding company that will make Porsche AG a wholly-owned subsidiary of the new company, which will also oversee the stake in Volkswagen.

The Wolfsburg-based company will remain independent. This company will then continue the current business operations of the sports car manufacturer under the existing company name Dr. Ing. h.c. F. Porsche AG, Baumann said. Then the holding company will be converted to a European Company, or Societas Europaea.

The SE corporate designation was introduced in 2004 to make cross-border mergers easier to implement and to help a company do business in other European Union member states without having to operate under different corporate laws.

Other companies that have made the change include German insurer Allianz, Finland's Elcoteq, Swedish financial service company Nordea and Norway's Narada Europe.

Volkswagen was seemingly accepting of the Porsche move.