Porsche conceded defeat in a month long power struggle with Volkswagen in July by axing its embattled CEO, paving the way for VW to merge with the maker of the 911 sportscar. As a way to improve its negotiating position with Volkswagen, Porsche also said it would raise at least €5 billion in equity as the two companies prepared to create an “integrated automotive group.”

Volkswagen said it planned to buy a stake in Porsche AG, the company’s financially healthy sports car business, and “gradually” expand this over time. VW and Porsche would be fully merged by mid-2011, said Christian Wulff, premier of Lower Saxony, the German state that is VW’s second largest shareholder.

He said the Gulf state of Qatar is set to buy a financial derivatives package that controls 17 percent of VW shares, in a further move to ease Porsche’s financial woes. It could expand its stake by acquiring non-voting preferred shares. Porsche amassed more than €10 billion in debt during a botched attempt to build a 75 percent stake in VW. Weighed down by the debt, Porsche was forced to abandon further stakebuilding earlier this year and negotiate a merger instead.

Disagreements about how to structure a deal held up negotiations. Porsche’s veteran CEO Wendelin Wiedeking, opposed a sale of Porsche to VW, clashing with Ferdinand Piech, the 72-year-old chairman of VW and grandson of Porsche’s founder, Ferdinand Porsche.