STOCKS NEWS EUROPE-VW seen dropping on Scania deal, outlook

Shares in Volkswagen (Other OTC: VLKAF - news) are indicated to drop 2.8 percent, according to pre-market data, after the German carmaker announces plans to buy out minority shareholders of Swedish trucks division Scania (Other OTC: SVKBY - news) for 6.7 billion euros ($9.2 billion) and issues a disappointing 2014 outlook.

Volkswagen says its 2014 operating margin could come in a range between 5.5 percent and 6.5 percent, after it was 5.9 percent last year.

"The weak guide for 2014 and the rich bid for Scania will likely dent sentiment and perpetuate the view that management is more focused on being big at the expense of shareholder returns," analysts at Barclays (LSE: BARC.L - news) say, cutting their recommendation on Volkswagen's stock to "equal weight" from "overweight".

At the same time, Barclays raises Scania's stock to "equal weight" from "underweight" and raises its price target to 200 Swedish crowns ($30.58), the level of Volkswagen's takeover offer.

A local trader says investors may also be disappointed that Volkswagen (Berlin: VOW.BE - news) expects it to take 10 to 15 years for the Scania deal to develop its full savings potential. "That is a long time," he says.

Reuters messaging rm://maria.sheahan.thomsonreuters.com@reuters.net

rm://daniela.pegna.thomsonreuters.com@reuters.net ($1 = 0.7275 euros) ($1 = 6.5411 Swedish crowns)