Volkswagen shares plunge on outlook, Scania deal

FRANKFURT/PARIS Mon Feb 24, 2014 9:14am GMT

Volkswagen Beetle cars are parked in a line in front of the triumphal arch at the arcades of the Parc du Cinquantenaire during a ''Love Bugs Parade'' in Brussels February 16, 2014. REUTERS/Laurent Dubrule

Volkswagen Beetle cars are parked in a line in front of the triumphal arch at the arcades of the Parc du Cinquantenaire during a ''Love Bugs Parade'' in Brussels February 16, 2014.

Credit: Reuters/Laurent Dubrule

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FRANKFURT/PARIS (Reuters) - Shares in Volkswagen (VOWG_p.DE) plunged on Monday after the group late on Friday toned down its 2014 operating profit outlook and announced plans to buy the rest of Swedish trucks division Scania SCVb.ST in a deal partly financed by a capital increase.

After falling as much as 7.5 percent in early trade, shares in Europe's largest carmaker were down 6.4 percent at 0848 GMT, dragging down the STOXX Europe 600 Automobiles & Parts Index .SXAP, which was 1 percent lower.

"Friday's release supported our concerns about muted earnings growth and the pace at which VW is adding capital (organic and M&A) and constraining returns," UBS analysts wrote in a note to clients, keeping a "sell" rating on the stock.

Volkswagen plans to buy out minority shareholders of Scania for 6.7 billion euros ($9.21 billion) as it aims to jump-start a stalled eight-year effort to forge Europe's biggest truckmaker.

It will sell preferred shares for up to 2 billion euros, issue hybrid capital of up to 3 billion euros and draw another 2 billion euros from its ample cash reserves.

The company also said its 2014 operating margin could be within a range of 5.5 percent and 6.5 percent, compared with 5.9 percent last year.

Analysts at Barclays cut their recommendation on Volkswagen's stock to "equal weight" from "overweight", saying they expected the weak outlook and the Scania bid to dent sentiment and underline a view that VW management was "focused on being big at the expense of shareholder returns".

After 30 minutes of trading on Monday, the volume of Volkswagen shares was more than the stock's daily average volume of the past three months.

($1 = 0.7275 euros)

(Reporting by Christoph Steitz and Blaise Robinson; Editing by Erica Billingham)

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