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Kesko has completed the acquisition of Suomen Lähikauppa - Siwa and Valintatalo stores to be converted into K-markets
KESKO CORPORATION STOCK EXCHANGE RELEASE 12.04.2016 AT 10 .30 1(4)
The transaction agreed between Kesko Corporation's subsidiary Kesko Food and the private equity investment firm Triton to acquire Suomen Lähikauppa has been closed. The debt-free price of the acquisition, structured as a share purchase, is approximately EUR60 million. In 2015, Suomen Lähikauppa's net sales were EUR935.7 million, it has around 600 Siwa and Valintatalo stores and around 3,800 employees.
"As the acquisition is completed, Suomen Lähikauppa will have a committed, responsible and solid Finnish owner. In line with our strategy, we seek growth in the grocery trade by renewing and increasing our neighbourhood market network. Suomen Lähikauppa has excellent business locations and the acquisition will enable us to implement our strategy faster than planned and with significantly less capital expenditure. The acquisition also enables significant synergies. We will now begin to write a new chapter in the Finnish neighbourhood retailing with the objective of doubling the footfall in our neighbourhood stores. The acquisition also supports the development of other K-Group grocery stores," says Kesko's President and CEO .
The Finnish Competition and Consumer Authority (FCCA) announced their approval of the acquisition on 11 April 2016. The permission contains conditions imposed by the FCCA. The FCCA made the acquisition conditional on the sale of 60 stores of Suomen Lähikauppa Oy to competitors. The FCCA also imposed an obligation to Suomen Lähikauppa Oy, transferred to Kesko Food Ltd's ownership, to continue purchases from Tuko Logistics Osuuskunta during a fixed period of 18 months in order that purchases can be reduced in stages.
Kesko will start converting the Siwa and Valintatalo stores into K-markets in May. The objective is to complete the conversions within the next year. At the same time, an extensive renewal of the entire K-market chain will begin.
"With the acquisition of Suomen Lähikauppa and the extensive K-market renewal, the neighbourhood retail services valued by Finnish consumers will improve significantly. The renewed K-markets will form Finland's most comprehensive and service oriented neighbourhood store network. These neighbourhood stores of the 2020s will offer a fresh and wide selection, comprehensive services and a reliable, competitive price level, all of it easily and fast. The visual image of K-markets will also be redesigned," says , Kesko's Executive Vice President and Senior Vice President for the grocery trade.
The Siwa and Valintatalo stores will be converted into K-markets in stages and the objective is to transfer all stores to K-retailers within the next two years. As the store network expands, Kesko will recruit and train hundreds of new K-retailers.
, Vice President for the logistics, supply chain and IT management of Kesko's grocery trade, has been appointed Suomen Lähikauppa's new Managing Director. He will report to Jorma Rauhala, Kesko's Executive Vice President and Senior Vice President for the grocery trade.
In 2015, Suomen Lähikauppa's net sales were EUR935.7 million and its operating profit was EUR-8.0 million.
Kesko estimates that it will achieve synergy benefits of approximately EUR25-30 million at EBITDA level from the acquisition as of 2018. Synergies are expected to arise especially from purchasing and logistics, marketing, store site network development, information system expenses and administration.
The achievement of synergies requires conversion costs for the renewal of the stores acquired from Suomen Lähikauppa. The costs of store and network conversion, to be treated as non-recurring restructuring costs, will total approximately EUR30 million in 2016-2018.
The future outlook announced in Kesko's financial statements release on 3 February 2016 was as follows: "Kesko Group's net sales for 2016 are expected to equal the level of the previous year. The operating profit excluding non-recurring items for 2016 is expected to slightly exceed the level of 2015. The future outlook does not take account of the acquisitions of Suomen Lähikauppa and Onninen, in respect of which estimates will be given in connection with their respective completions."
As a result of the completion of the acquisition of Suomen Lähikauppa, Kesko's future outlook for 2016 has now been updated. According to the updated future outlook, Kesko Group's net sales for 2016 are expected to increase from the previous year. The operating profit excluding non-recurring items for 2016 is expected to equal the level of 2015. The future outlook does not take account of the acquisition of Onninen, in respect of which estimates will be given in connection with its completion.
Kesko will hold a briefing on the acquisition today, 12 April 2016 at 13.00 in the auditorium at Ankkurikatu 5, Helsinki (Katajanokka). The briefing can be viewed on webcast at www.kesko.fi.
An English-language audio conference on the acquisition will be held today at 15.00 (Finnish time). The audio conference login is available at
www.kesko.fi .
Kesko has published stock exchange releases on the acquisition on 18 November 2015 and 11 April 2016.
Jorma Rauhala, Executive Vice President and Senior Vice President for the grocery trade, tel. +358 105 322 211
Jukka Erlund, Senior Vice President, Chief Financial Officer, tel. +358 105 322 113 Karoliina Partanen, Vice President, communications, grocery trade, tel. +358 105 320 744
Kesko Corporation
Merja Haverinen
Vice President, Group Communications
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