Europe's biggest carmaker, Volkswagen AG, will acquire a 42 percent stake in sports car manufacturer Porsche AG this year as part of a plan to merge the feuding carmakers by 2011.

The deal, announced by Volkswagen on Thursday, ends a long takeover fight that had pitted the descendants of Ferdinand Porsche against each other.

"Volkswagen and Porsche today took a decisive step toward a joint future," Volkswagen CEO Martin Winterkorn said in a statement. "As a group with now 10 strong, independent brands, we will further expand our unique global position. More than ever before, we now have what it takes to become the automotive industry's No. 1."

Volkswagen will pay as much as $4.7 billion for the 42 percent stake in Porsche AG as part of a complex, multistep transaction.

Porsche, which took on a lot of debt to pursue a failed bid for VW, will sell most of the options it holds on VW shares to the Gulf state of Qatar.

The Porsche SE holding company owns 50.8 percent of VW's voting stock. Porsche's owners, the Porsche and Pi�ch families, will be the leading shareholder bloc in the enlarged automaker, followed by the German state of Lower Saxony, which owns 20 percent of Volkswagen.

Lower Saxony will continue to exercise the veto power over major corporate decisions that it wields as a result of a controversial law. "The existing blocking minority rule will be reaffirmed," VW said.

Qatar will become the third-largest shareholder if it acquires the options and exercises them.

Volkswagen said Porsche would be independent, like its other brands. VW owns an array of marques, including Audi, Bentley and Lamborghini. Porsche, which makes the legendary 911 sports car, would retain its headquarters in Zuffenhausen in southern Germany, far from VW's northern base in Wolfsburg, near Berlin.

The savings and other benefits of the merger will lead to an annual increase in operating profit of $1 billion, VW said. The carmakers' combined sales total 6.3 million vehicles a year.

The two companies have historical ties going back to Ferdinand Porsche, an illustrious engineer who helped design the original Beetle for VW.

The respective heads of the supervisory boards of Porsche and Volkswagen, Wolfgang Porsche and Ferdinand Pi�ch, are grandsons of Ferdinand Porsche.