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Kesko to acquire rival grocery chains Valintatalo and Siwa

Finnish retail conglomerate Kesko announced it is set to acquire loss-making grocery store chain company Suomen Lähikauppa for 60 million euros. Suomen Lähikauppa's chains include Valintatalo and Siwa supermarkets.

Lapinkävijäntien Siwa Rovaniemellä. Image: Miikka Miinala / Yle

Kesko said on Wednesday that it has agreed to acquire Suomen Lähikauppa from private equity investment firm Triton for a debt-free sum of 60 million euros.

The company's 643 ubiquitous Siwa and Valintatalo grocery stores operated at a loss of 11.6 million euros in 2014, with 999.2 million euros in pre-tax sales revenue.

Pending approval from the Finnish Competition and Consumer Authority and fulfilment of other terms and conditions, the acquisition would return the chains to Finnish ownership.

Kesko said that it expects the acquisition to be complete in the first half of 2016.

"Finnish grocery trade is tough"

In a press release Kesko's CEO Mikko Helander said that his company is looking for growth in the grocery trade, and intends to "renew the neighbourhood store network."

"Suomen Lähikauppa has excellent business locations and the acquisition will enable us to implement our strategy faster than planned and with significantly lower capital expenditures," Helander said.

"Competition in the Finnish grocery trade is tough and the weakening of consumers' purchasing power has intensified it," he said.

Suomen Lähikauppa's sales amounted to 999.2 million euros in 2014, and owns 643 Siwa and Valintatalo grocery stores across Finland and employs about 4,100 people.

Ralf Holmlund, CEO of Suomen Lähikauppa said "the transaction will enable Finnish neighbourhood retailing to be developed and it will open up significant new opportunities to serve Finnish consumers."

A look at the companies

Kesko is a Finnish-listed trading sector company and operates in the grocery, home improvement, specialty goods and car trades. Kesko has an estimated 33 percent of the grocery market in Finland, following the market leader S-Group, which has a market share of about 46 percent.

If the Suomen Lähikauppa acquisition goes through, Kesko will have an estimated 40 percent market share in Finland's grocery sector.

Kesko has more than 1,500 stores across the Nordics, the Baltic region and in Russia and Belarus and employs nearly 20,000 people. The conglomerate's net sales in 2014 amounted to some 9.1 billion euros.

The chains' current owners, Triton, acquired Suomen Lähikauppa at the beginning of 2013. Triton owns 30 companies with combined sales of 14 billion euros and more than 60,000 employees.

The Triton funds are advised by investment professionals in Germany, the Nordics, the United Kingdom, Luxembourg, Jersey, Italy and China.

Edited to include Kesko market share figures.

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