Finnish grocery market just lost an alternative. The small store specialist Suomen Lähikauppa Oy with 643 Valintatalo and Siwa stores with 6.8 percent of the market will now become a part of Kesko.
”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,” says Kesko CEO Mikko Helander.
Kesko Corporation’s subsidiary Kesko Food Ltd has made an agreement to acquire the whole share capital of Suomen Lähikauppa Oy from the private equity investment firm Triton.
The net sales of Suomen Lähikauppa in 2014 were 999.2 million EUR, it has 643 Siwa and Valintatalo stores and 4,100 employees. The transaction price of the debt-free acquisition, structured as a share purchase, is approximately 60 million EUR.
“In line with its strategy, Kesko is seeking growth in the grocery trade. One of the focus areas for growth is to increase and renew the neighbourhood store network. We want to develop the accessibility, quality and price competitiveness of neighbourhood retail services that suit Finnish consumers. At the same time, the transaction will enable significant synergies. 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. Competition in the Finnish grocery trade is tough and the weakening of consumers’ purchasing power has intensified it,” says Kesko’s President and CEO Mikko Helander.
Suomen Lähikauppa has concentrated on grocery stores located close to customers. But it’s been tough recent years. A consolidation between the two chains becoming only Siwa has started. In 2014, Suomen Lähikauppa’s loss before tax was 11.6 million EUR.
“We have a long established focus on neighbourhood retailing and we possess special expertise and experience in this market. The transaction will enable Finnish neighbourhood retailing to be developed and it will open up significant new opportunities to serve Finnish consumers. This is definitely a good alternative also for Suomen Lähikauppa,” says Ralf Holmlund, President and CEO of Suomen Lähikauppa, in a statement.
Last year Lidl passed Suomen Lähikauppa in market shares and is today the only grocery chain to challenge Kesko and S Group. Mikko Helander says the goal is to reach at least 35 percent market share for Kesko and this acquisition is in line with the new strategy.
The synergies for Kesko will also become a hard hit on Tuko Logistics Cooperative who’s got Suomen Lähikauppa as their biggest customer (39%). There is also a fear among Siwa and Valintatalo employees that Kesko might start closing stores.
The completion of the acquisition is subject to the approval of the Finnish Competition and Consumer Authority and the fulfilment of the other terms and conditions of the transaction. The handling of the matter and the acquisition are expected to be completed in the first half of 2016. Kesko says in Finnish media it believes it will an easy decision for the authority.