Update: Porsche has confirmed today that it has rejected the Volkswagen ultimatum.

Volkswagen has proposed an offer to rival German carmaker Porsche that would eventually lead to a merger.

Under the proposed plan, the Gulf state of Qatar will get up to a 20 percent stake, Lower Saxony 20 percent, and the two Porsche owners (Porsche and Piech families), would get 40 percent of the newly merged company.

On January 7, 2009, Porsche announced it upped its stake in VW to 50.8 percent and made it clear it wanted financial control over VW with its goal of reaching a 75 percent stake in the firm.

Porsche has now accumulated EUR 9 billion in debt as part of its plan to reach a 75 percent stake in VW.

Reports indicate if Porsche declines the new VW offer, VW could demand repayment of a EUR 700 million loan.

Additionally, Porsche is currently in “final stretch” negotiations with Qatar on selling a significant stake to the country. Qatar wants a direct deal with Porsche, but could also buy appropriate stock options in VW that Porsche holds. The two Porsche families could even reach a deal in the coming days with Qatar.

In 2008, Porsche recorded net income of UR 6.39 billion, of which EUR 1 billion came from operations.