Volkswagen AG agreed to buy the 50.1 percent stake in Porsche SE's automotive business that it doesn't already own for 4.46 billion euros ($5.6 billion), ending a seven-year takeover saga that divided two of Germany's most powerful families.

VW was able to proceed with the transaction after reaching an agreement with German tax authorities, it said in an emailed statement late yesterday. The cash deal is based on an equity value of 3.88 billion euros and also includes what the Porsche holding company would have received in dividend payments and half of the forecast synergies from the combination.

The agreement means Wolfsburg, Germany-based Volkswagen can now fully fold the Porsche automaking business into its stable of brands, which range from Audi sedans to Ducati motorbikes.

The two companies agreed to combine in 2009 after Stuttgart- based Porsche racked up more than 10 billion euros of debt in an unsuccessful attempt to take over Europe's largest carmaker.

“It's very positive for VW as they get 50 percent of an asset they value at 26 billion euros on their own books for 4.46 billion euros,” said Erich Hauser, a Credit Suisse analyst in London. “If I was a Porsche shareholder, I'd feel slightly short changed though.”

Volkswagen gained as much as 5.75 euros, or 4.5 percent, to 133.75 euros and was up 4 percent as of 9:13 a.m. in Frankfurt trading. The shares have climbed 15 percent this year, valuing the carmaker at 59 billion euros. The Porsche SE holding company's stock rose as much as 5.8 percent and was up 3.4 percent to 43.42 euros, giving it a market value of 13.3 billion euros.

Eoin Treacy's view Volkswagen shares became the playthings of short sellers during the financial crisis only to rally spectacularly when lent shares were called back; forcing one of the biggest short covering rallies in history. Following a very brief sojourn as the most valuable company in the world Volkswagen collapsed back into relative obscurity before bottoming in 2010 and ranging mostly above €100 since early 2011. The share has held a progression of higher reaction lows since October and a sustained move below €110 would now be required to question additional potential for higher to lateral ranging.

More generally, the automotive sector has endured a difficult 6 months as the perception of global growth deteriorated. China's economy is particularly relevant since the sector depends on the country for the majority of its growth. Among European manufacturers BMW, Daimler, Audi, Volvo and Renault have held progressions of higher reaction lows since October and potential for additional higher to lateral ranging can continue to be given the benefit of the doubt provided they continue to hold above their recent lows. Fiat retested its October low in May and has returned to test the region of the 200-day MA. It will need to sustain a move above this trend mean to confirm a return to demand dominance beyond the short term. Peugeot Citroen has lost momentum following a steep decline over the last year but a sustained move above €8.25 will be required to break the progression of lower rally highs and suggest swifter mean reversion.

In the USA, Ford and General Motors encountered resistance in the region of the 200-day MA from February and has returned to test the region of the October low. Clear upward dynamics will be required to confirm support in this area. Tesla Motors will need to hold its progression of higher reaction lows if the medium-term upside is to continue to be given the benefit of the doubt.

The strength of the Yen has offered an additional headwind for the Japanese car industry. While the majority of companies have either been ranging or trending lower, there are signs that demand may be returning to dominance for at least some. Honda, Nissan, Suzuki and Toyota recently found support above their respective late 2011 lows and sustained moves below their June lows will be required to question potential for additional higher to lateral ranging. Toyota in particular is outperforming. Mitsubishi has been a laggard, but found at least short-term support in June. However, it will need to sustain a move above the 200-day MA to begin to suggest more than temporary steadying.

Elsewhere in Asia, Maruti Suzuki India rallied to break the more than two-year progression of lower rally highs from January and found support in the region of the MA in June. A sustained move below INR1055 would now be required to question potential for additional upside. Tata Motors had become overextended relative to the 200-day MA when it encountered resistance near INR 320. It pulled back sharply and has paused in the region of the 200-day MA over the last month. It will need to hold above the June low if the benefit of the doubt it to be given the upside. Hero MotoCorp has been mostly rangebound, albeit with an upward bias over the few years. A sustained move below INR 1800 would be required to question medium-term scope for continued higher to lateral ranging.

In South Korea, Hyundai has held a progression of higher reaction lows since late 2008; finding support in the region of the 200-day MA on successive occasions. It has returned to test the MA and will need to continue to find support in this region if the broad consistency of the more than three-year advance is to remain intact. Kia Motors lost momentum following an impressive accelerated advance from April 2011. The share has held the majority of the advance but a large broadening pattern following such an impressive earlier advance is not confidence inspiring. It will need to hold above KRW70000 if the medium-term upside is to continue to be given the benefit of the doubt.

Greatwall Motors is the best performing of the Chinese automakers. It continues to consolidate mostly above the 2011 high in a steady mean reversion. Provided it continues to hold above HK$13 the benefit of the doubt can continue to be given the upside. Geely Automotive found at least short-term support in the region of the 200-day MA from early June. Yulon Motor has rallied to test the declining 200-day MA but will need to sustain a move above it to suggest a return to demand dominance beyond the short term. Dongfeng Motor Group and Shanghai Auto have returned to test the lower side of their respective multi-month ranges where they will need to find support if supply dominance is to be questioned.