* Shares in Europe's No.1 carmaker fall as much as 7.5 pct
* Mixed reception to bid from Scania minority investors
* Shares in Scania jump 32 percent
(Recasts, adds analyst comment)
By Christoph Steitz and Sven Nordenstam
FRANKFURT/STOCKHOLM, Feb 24 Volkswagen's
drive to strengthen its trucks business spooked
shareholders on Monday, who balked at a generous 6.7 billion
euro ($9.2 billion) offer to buy the rest of Sweden's Scania, as
well as at the carmaker's cautious 2014 outlook.
The plan to take full control of Scania aims to
reinvigorate an eight-year attempt to forge a truck alliance
between Volkswagen (VW), MAN SE and Scania and build a
global truck business to rival that of Daimler.
VW shares dropped as much as 7.5 percent after Europe's
biggest carmaker said late on Friday it would seek to raise up
to 2 billion euros from holders of preference shares and up to 3
billion euros of hybrid capital to help it buy the 37 percent of
Scania it does not yet own.
It also said its 2014 operating margin could be within a
range of 5.5-6.5 percent, compared with 5.9 percent last year
and analysts' mean forecast of 7.4 percent in Thomson Reuters
"For a long while, VW's endless European market share gains,
constant success with (premium car brand) Audi, magical claims
for the potential of MQB (modular platforms) and stated
ambitions for global dominance combined to convince many that
this was The World's Best Auto Stock," analysts at Bernstein
"But such optimism has faded - VW has now disappointed the
market quite a few times. 2014 will represent the fourth year of
flat earnings in a row," they added.
UBS analysts affirmed their "sell" rating on the stock,
saying Friday's news supported their concerns about muted
earnings growth at VW as well as the pace at which the company
was adding capital and constraining returns.
After just 30 minutes of trading on Monday, the volume of VW
shares that had changed hands was more than the stock's daily
average volume of the past three months, and the stock was down
6.7 percent at 187.45 euros at 1400 GMT.
That was the biggest decline by a European blue-chip stock
and contributed to a 1.3 percent decline in the STOXX
Europe 600 Automobiles & Parts Index.
Scania shares, meanwhile, were up 32 percent at 195.00
Swedish crowns, slightly below VW's 200 crowns per share bid.
The bid puts Scania's enterprise value - equity plus debt -
at 16.7 billion euros or 12.6 times estimated 2016 earnings
before interest and tax. That represents a 29 percent premium to
the European machinery sector in general and a 56 percent markup
on rival truck maker Volvo, according to Thomson
Nonetheless, Swedish pension funds, some of which have
complained about what they see as VW's heavy-handed treatment of
Scania's minority owners, gave a mixed reaction to the bid.
Nordea Funds, with around 0.7 percent of Scania shares, said
the offer was attractive and it would accept it, whereas
Skandia, which holds around 0.9 percent, said it would not
accept the bid.
State-controlled pension fund AP4 said it was a "delicate
task" to evaluate it, and did not take a stance for or against.
Moving to block the bid and hold out for a higher offer
could be risky, however, as VW could revert to running Scania
without full control, depriving minority owners of the big
short-term windfall from the bid.
VW and MAN together hold large stakes of voting-strong A
shares in Scania under Sweden's dual share system, giving them
nearly 90 percent of votes in the company.
Swedish institutional owners last year forced Lindengruppen
to raise its bid for industrial firm Hoganas, but ownership in
that firm was less scattered than it is in Scania, meaning it
would take cooperation by many more owners this time to add up
to the 10 percent needed to block a bid.
In 2008, private equity firm Triton walked away from its bid
on information distributor Cision after opposition
from Skandia Liv and AP4.
($1 = 0.7275 euros)
(Additional reporting by Blaise Robinson, Oskar von Bahr and
Edward Taylor; Editing by Erica Billingham and Mark Potter)