"Porsche will now hold talks about alternative financing possibilities," the company said in a statement following the decision. It is saddled with around €9 billion worth of debt amassed while building up a 51 percent stake in Volkswagen.
Qatar has offered to invest in debt-laden German sports car maker Porsche and to buy stock options it holds in Volkswagen, a Porsche spokesman said late Monday.
"We have received an offer from Qatar for the acquisition of a participation and a purchase of options on Volkswagen shares," he said.
The offer would serve as a basis for further talks, but must be examined by the Porsche and Piech familes, which own all of the voting rights in Porsche, he added.
Sources close to the talks were quoted by the Frankfurter Allgemeine Zeitung newspaper on Tuesday as saying that Qatar had made it known that it would like to see the creation of an integrated group that included both companies.
On Monday, Stuttgart-based Porsche firmly rejected an offer from VW, which wants the maker of the 911 sports car to become its 10th brand.
Porsche was initially set to buy VW and still owns 51 percent of the biggest European automaker.
But Porsche racked up €9 billion in debt pursuing VW, and is now facing problems because the global automobile market has hit hard times and a German firms are struggling in a credit crunch.
Porsche and VW decided to hold talks on a merger, but that has been held up by quarrels between the Porsche and Piech families.
Ferdinand Piech, head of the VW supervisory board, and his cousin Wolfgang Porsche, who holds the same position at Porsche, disagree on how best to save Porsche.
"It appears that... the relations... between VW and Porsche have hit an all-time low," said IHS Global Insight analyst Tim Urquhart. "What was already a difficult negotiation is rapidly descending into farce."
Piech backs a merger with VW, while Porsche backs his company's head, Wendelin Wiedeking, who wants to save the firm's independence, and his job.