Kesko to acquire Onninen and strengthen its position in the building and technical trade

KESKO CORPORATION STOCK EXCHANGE RELEASE 12.01.2016 AT 09.00 1(5)

Kesko to acquire Onninen and strengthen its position in the building and technical trade

Kesko Corporation has made an agreement to acquire Onninen Oy's whole share capital from Onvest Oy. The pro forma net sales of the business to be acquired were €1,438 million and the EBITDA was €39 million for the period from October 2014 until the end of September 2015. The transaction price of the debt-free acquisition, structured as a share purchase, is €369 million. Onninen's steel business and Russian subsidiary are not included in the acquisition.

The new entity will offer full building and technical trade selections for both business and consumer customers. The acquisition will create an excellent platform for the growth of Kesko's building and technical trade in Finland and the rest of Europe.

Building and renovation are becoming increasingly technical and are increasingly often assigned to professionals. Responding to this change taking place in the market is one of the key objectives of Kesko's strategy. The acquisition of Onninen will especially strengthen B2B sales. In the sales of the K-Group's building and technical trade, the share of B2B sales is over 40 per cent and with the acquisition, the share of B2B sales will rise to around 60 per cent.

With the acquisition Kesko's business in HEPAC and electrical product groups will expand significantly and it will be able to provide better service especially to contractor customers. In addition, Kesko will gain new customer relationships from infrastructure and industry customer groups.

Both companies operate in the Baltic Sea Region and Scandinavian markets. After completion, the arrangement will enable Kesko to gain significant economies of scale and synergies.

"People have less time than before to carry out building projects that are technically increasingly demanding and, more than before, they want to buy ready-made building solutions. One of the key objectives of our strategy is to respond to this development. With the acquisition of Onninen we will gain lots of new, top notch expertise and expand into new product lines and new customer groups. Onninen and its strong brand will give Kesko an excellent opportunity to develop and expand sales to business customers. For Kesko, the acquisition of Onninen is a perfect match, and the €3.6 billion net sales of Kesko's building and technical trade will make it one of the leaders in the field in Europe and the most international trading sector operator in Finland," says Kesko's President and CEO Mikko Helander.

Onninen is one of the leading providers of HEPAC and electrical products and services in the Baltic Sea Region and Scandinavia. The group specialises in B2B trade and has around 150 units in Finland, Sweden, Norway, Poland, the Baltic countries and Russia. The business to be acquired from Onninen employs around 3,000 people, around 1,200 of whom work in Finland. The company's steel business and Russian subsidiary are excluded from the acquisition.

Maarit Toivanen-Koivisto, Chair of the Onvest Board, sees the acquisition as a good solution for Onninen. "This is a significant transaction. The combination of Onninen and Kesko will provide the Finnish industry sector with an excellent distribution channel to the international markets. Together the companies will form one of the largest building and technical trade companies in Europe, for which Onninen's technical trade expertise provides a strategically significant competitive advantage. The acquisition will create significant opportunities when we will be able to share the best practices of both companies. At the same time, it is important that Onninen remains in Finnish ownership."

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, assuming that the acquisition is completed during the first half of 2016. 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 the use of common customer relationships, from purchasing and logistics, from 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 will be paid in cash from Kesko's liquid assets and available debt financing reserves.

Estimates of Kesko's future outlook in respect of the acquisition will be given in connection with its completion.

The completion of the acquisition is subject to the approval of the competition authorities and the fulfilment of the other terms and conditions of the transaction. The acquisition is estimated to be completed during the first half of 2016.

Onninen Group's profit performance and financial position*

*The information in the pro forma income statements and balance sheets is unaudited and derived from Onninen Group's management reporting.

Briefing in Finnish at Kesko today, Tuesday, 12 January 2016 at 11.00
Kesko will hold a briefing on the acquisition today at 11.00 in the auditorium at Ankkurikatu 5, Helsinki (Katajanokka). The briefing can be viewed on webcast at www.kesko.fi.

Audio conference in English today, Tuesday, 12 January 2016 at 14.30
An English-language audio conference on the acquisition will be held today at 14.30 (Finnish time, EET). The audio conference login is available at www.kesko.fi.

Further information:
Terho Kalliokoski, President, home improvement and speciality goods trade division, tel. +358 105 320 200, terho.kalliokoski@kesko.fi
Jukka Erlund, 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

DISTRIBUTION
Nasdaq OMX Helsinki Ltd
Main news media
www.kesko.fi

Kesko is a Finnish listed trading sector company operating in the grocery trade, the home improvement and speciality goods trade and the car trade. Its divisions and chains act in close cooperation with retailer entrepreneurs and other partners. In 2014, Kesko's net sales were €9.1 billion and the number of personnel was nearly 20,000. Kesko has over 1,500 stores engaged in chain operations in Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Russia and Belarus. Kesko's shares are listed on Nasdaq Helsinki. The company's domicile and main premises are located in Helsinki. Kesko is the fifth most sustainable company in the world (The Global 100 Most Sustainable Corporations in the World). www.kesko.fi

Kesko is the fifth largest operator in the European building and home improvement trade market. Our retail chains in the sector are K-rauta, Rautia, Byggmakker, Senukai and OMA. In addition to a strong store network, we serve our customers with digital services and online stores. In the building and home improvement trade, we operate in Finland, Norway, Sweden, Estonia, Latvia, Lithuania, Russia and Belarus. In 2014, the net sales of the building and home improvement trade were nearly €2.2 billion and the number of personnel nearly 9,000. The building and home improvement trade business is part of Kesko's home improvement and speciality goods trade division. www.kesko.fi

Onninen offers comprehensive material and information flow solutions to contractors, industry, public organizations, retailers of technical products and suppliers. The Finnish company, established in 1913, today employs a total of around 3,000 people in its operations in Finland, Sweden, Norway, Poland, Russia and the Baltic countries. In 2014, the group's net sales were €1.5 billion. www.onninen.fi

Onvest is a Finnish family business, with a history stretching back a century. Onvest's business areas comprise the Onninen and Are groups, as well as investment and real estate operations. The Onvest group employs around 5,900 people in eight countries. www.onvest.fi