VW shares rose 5.3 percent and Porsche SE (PSHG_p.DE) holding company stock was also up 1.3 percent as of 4.55 a.m. EDT, after the companies announced late on Wednesday that VW would pay 4.46 billon euros ($5.9 billion) in cash and a single common share to the holding company for the 50.1 percent of Porsche's autos business that it did not already own.

"VW is getting a good deal," said London-based Morgan Stanley analyst Stuart Pearson, predicting in a note to investors that its completion would lift VW earnings by 6 percent next year. "Porsche is the world's best premium car story," he said.

With sales volumes running close to 20 percent above their previous record, Porsche's main challenge is "securing sufficient production capacity", and integration with VW may help, Pearson added. VW already plans to begin assembling some Porsche models in its own plants.

Europe's largest carmaker has been pushing for rapid integration of Porsche's automotive businesses to generate annual cost savings of 700 million euros and erase about 2 billion euros of debt at the sports car maker's holding company.

Porsche and VW agreed a merger in August 2009 after the maker of the iconic 911 sports coupe racked up more than 10 billion euros of debt attempting to buy VW, pitting the Porsche family against the rival Piech dynasty.

VW had abandoned the earlier merger plan last September, citing unquantifiable legal risks from lawsuits filed by short-sellers in the United States and Germany who accuse Porsche of secretly piling up VW shares during its failed takeover attempt, causing investors to lose billions of dollars.

At a press conference at its Wolfsburg, Germany, headquarters on Thursday the company said it expected the integration of Porsche to be fully ratified by August 1.

Full consolidation of Porsche's auto-making operations will boost VW's full-year financial result by more than 9 billion euros and shrink its net liquidity by about 7 billion euros, the company has said.

Both companies had for months been exploring ways to avoid taxes of as much as 1.5 billion euros that would have been incurred if VW were to seal the purchase before August 2014.

Submitting a single common VW share to Porsche SE may classify the deal as a restructuring under Germany's so-called reorganization tax law, enabling VW to complete the transaction ahead of schedule without incurring a huge tax bill.

($1 = 0.7994 euros)

(Writing by Laurence Frost; Editing by Will Waterman)

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