Kesko has acquired Onninen - new building and technical trade division to continue international growth

KESKO CORPORATION STOCK EXCHANGE RELEASE 01.06.2016 AT 12.00 1(4)

Kesko has acquired Onninen - new building and technical trade division to continue international growth

Kesko Corporation has acquired Onninen Oy's whole share capital from Onvest Oy. The acquisition does not include Onninen's steel business or Russian subsidiary. The new entity that combines the building and home improvement trade and the technical trade will make Kesko an even stronger international operator in Europe. Kesko's home improvement and speciality goods trade division is renamed the building and technical trade division. Owing to the acquisition, Kesko has updated its outlook.

In 2015, the pro forma net sales of the acquired business were €1,465 million and the EBITDA was €39 million. The price of the debt-free acquisition, structured as a share purchase, is €369 million. Onninen has around 3,200 employees and 150 units in seven countries.

On 12 January 2016, Kesko Corporation announced in a stock exchange release that it would acquire Onninen Oy's whole share capital from Onvest Oy. Onninen's steel business and Russian subsidiary are not included in the acquisition. The permissions required for the acquisition have been obtained from the Finnish Competition and Consumer Authority and the European Commission. The permissions do not contain any conditions.

Total solutions for customers as the keys to growth

The acquisition of Onninen will accelerate the implementation of Kesko's international growth strategy and provide significant synergy potential. Kesko's business operations will expand in the HEPAC and electrical product groups and it will be able to better serve contractor customers in particular. In addition to this, Kesko will gain new customer relationships from the infrastructure and industry customer groups. Both companies operate in the Baltic Sea Region and Scandinavian markets constituting the most comprehensive store network and the largest sales organization in northern Europe.

"Kesko is clearly the most internationalised trading sector company in Finland. The acquisition of Onninen will further strengthen our position in Finland and open up new interesting opportunities for growth in the European building and technical trade. In addition to B2C customers, we also want to serve B2B customers with even better total solutions and services. Onninen is a perfect match for Kesko's building and home improvement trade business," says Kesko's President and CEO Mikko Helander.

Focusing on B2B customers is due to global megatrends. Consumers increasingly often buy services from companies and an increasing share of building and renovation work is performed by professionals. Especially renovation building that boosts the demand for Onninen's product lines and areas of expertise is growing. Urbanisation, the rising standard of living and the ageing of population are increasing the use of services.

"The standard of living is growing and building is becoming increasingly technical. People are less eager to build and renovate themselves, which is why there has been a significant growth in interest in the comprehensive solutions we offer. This, in turn, means more work for building, HEPAC and electrical engineering companies, in other words, our B2B customers. Our objective is to create an entity of building and technical trade services for our customers in which building and renovation service providers and consumers meet - an ecosystem of services," says Terho Kalliokoski, Kesko Executive Vice President and the President for the building and technical trade division. 

Division renamed the building and technical trade

The home improvement and speciality goods trade division is renamed the building and technical trade division. The name is changed because the focus of the division has shifted to technical trade and B2B customers. The division is led by Kesko Executive Vice President and Division President Terho Kalliokoski. Mikko Pasanen has been appointed Onninen's CEO. He is responsible for the B2B business of Kesko's building and technical trade and reports to Terho Kalliokoski.

Financial impacts of the acquisition

Kesko estimates that the acquisition will generate around €30 million in annual synergies at the EBITDA level from 2020 onwards. The achievement of synergies will require both capital expenditures and non-recurring costs. The combined net cash flow impact of synergies is estimated at around €25 million positive in 2016-2019.

Economies of scale and synergies will mainly be sought from common customer relationships, purchasing and logistics, the development of the store site network, as well as from ICT and administration.

The fair value allocations of the transaction price to net assets are estimated to cause an expense item of around €5 million on the first six months.

The transaction was paid in cash from Kesko's liquid assets and available debt financing reserves.

Updated outlook

The outlook in Kesko's interim report published on 27 April 2016 was as follows: "Estimates for the outlook of Kesko Group's net sales and operating profit excluding non-recurring items are given for the 12-month period following the reporting period (4/2016-3/2017) in comparison with the 12 months preceding the end of the reporting period (4/2015-3/2016). Kesko Group's net sales for the next 12 months are expected to exceed the level of the preceding 12 months. The operating profit excluding non-recurring items for the next 12-month period is expected to equal the level of the preceding 12 months. The outlook does not take account of the acquisition of Onninen, in respect of which estimates will be given in connection with its completion."

As a result of the completion of the acquisition of Onninen, Kesko's outlook has been updated. According to the updated outlook, Kesko Group's net sales and operating profit excluding non-recurring items for the period 4/2016-3/2017 are estimated to exceed the level of the period 4/2015-3/2016.

Briefing in Finnish today at 14.00

A briefing in Finnish will be held today at 14.00 in Kesko's Dekostudio at Bulevardi 46, Helsinki. Kesko's Dekostudio is a meeting place intended for building and interior decoration professionals, designers and architects, and a product showroom. Dekostudio will open at 13.30 for taking a look around before the briefing.

The briefing can be viewed on webcast at www.kesko.fi. Further information about the briefing is available at www.kesko.fi/tiedotustilaisuus. 

Onninen Group's profit performance and financial position

Further information:
Terho Kalliokoski, Executive Vice President and President for the building and technical trade division, tel. +358 105 320 200, terho.kalliokoski@kesko.fi
Jukka Erlund, Senior Vice President, Chief Financial Officer, tel. +358 105 322 113, jukka.erlund@kesko.fi
Lauri Peltola, Senior Vice President, communications, corporate responsibility and stakeholder relations, tel. +358 105 322 400, +358 505 705 606, lauri.peltola@kesko.fi

Kesko Corporation

Merja Haverinen
Vice President, Group Communications

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