KESKO TO ACQUIRE SUOMEN LÄHIKAUPPA

18 Nov. 2015President and CEO Mikko Helander

• Debt-free transaction price

approximately €60 million

• Suomen Lähikauppa has 643 Siwa

and Valintatalo stores

• Net sales in 2014

approximately €1.0 billion

• Loss before tax

approximately €12 million

• Employees approximately 4,100

• Owned by private equity investment

firm Triton

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KESKO TO ACQUIRE SUOMEN LÄHIKAUPPA

• K-Group’s sales €11.3bn

• Operations is eight countries

• More than 1,500 stores

• Over 1.3 million customer visits

every day

• Personnel 45,000 FOR SHOPPING TO BE FUN

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K-GROUP

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FINNISH GROCERY TRADE MARKET

• Grocery trade market is approximately

€16.7 billion

• Finnish grocery trade market has

shrunk by 1.1% in 1-9/2015

• Prices in grocery trade have fallen

during the current year

• Competition in grocery trade has

intensified further

Source: Nielsen

K-Group 33.1%

S-Group 45.7%

Lidl 7.6%

Suomen Lähikauppa 6.8%

Others 6.8%

ACQUISTIONS HAVE MODIFIED THE MARKET

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Source: Nielsen, store register 2014

Market shares of grocery sales by trading group, 1978–2014

• S-Group has significantly

increased its market share

through acquisitions

- 2004 Elanto

- 2006 Suomen Spar

K-GROUP PROGRESSES IN LINE WITH STRATEGY

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• We grow profitably in three strategic areas: the grocery trade, the building

and home improvement trade and the car trade.

• In the grocery trade, profitable growth is sought especially in Finland

• We invest heavily in the neighbourhood market

• Suomen Lähikauppa has excellent business locations – the acquisition will

accelerate the implementation of the grocery trade strategy

• Ageing of population

• Urbanisation and the growth in

single households

• Increasingly individualised customer

behaviour

• Responsibility and environmental

benefits of neighbourhood services

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MEGATRENDS IN SOCIETY REQUIRESTRENGTHENED NEIGHBOURHOOD SERVICES

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KEY BENEFITS FROM THE ACQUISITION

• Renewal of existing and new neighbourhood stores and improvement of

services and selections

• Significant synergies

• Capital expenditure plan for the upcoming years has been updated taking

account of the acquisition to be completed, as well as the continuously

challenging general economic situation, especially in Finland and Russia:

capital expenditure in 2015-2017 will decrease from the approximately €1 billion

announced in the strategy to €750 million

RENEWAL OF THE K-GROUP’S GROCERY TRADE

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KESKO’S GROCERY TRADE

• Our value: customer and quality

in everything we do

• The world’s most responsible food store

• Employees: 8,090

• K-food stores: 904

Net sales €4,754m

Operating profit* €223m

Operating margin, %* 4.7%

Kespro 13%

Grocery tradeFinland 85%

Grocery tradeRussia 2%

Grocery trade

Key figures for 2014

Net sales for 1-9/2015: €3,424m

*excluding non-recurring items

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WE STRENGHTEN OUR COMPETITIVENESS

• We improve our price competitiveness

• We develop our quality and service

further

• We strengthen our digital services

• We renew our retailer business model

• We develop neighbourhood market

services

• We renew all chain concepts

INVESTMENTS IN NEIGHBOURHOOD MARKET

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• Comprehensive renewal of existing network

• Chain’s stores divided in three formats: ”Express”, ”City” and ”Province”

• Formats will modify store’s selections and displays paying closer

attention to the store’s competitive situation and customer base

• Implementation of a completely new service station store concept and

expansion of the network jointly with Neste

• We test a completely new store concept

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• Our key strategic choice is to increase the neighbourhood store network

• Our current neighbourhood market network

comprises approximately 600 K-food stores

• Suomen Lähikauppa’s 643 stores, of which 502 Siwa and 141 Valintatalo stores, will complement our store network

• Suomen Lähikauppa has good store sites in

cities and population centres throughout the

country

We will bring a quality and price competitive neighbourhood

store of the modern age closer to every Finnish customer

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ACQUISITION WILL ACCELERATE THE IMPLEMENTATION OF OURNEIGHBOURHOOD MARKET STRATEGY

NEXT STEPS

• 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

estimated to be completed in the first half of 2016.

• Practical integration cannot start until the acquisition has been confirmed

• Until then, the companies continue as independent and separate operators –

the operations of both companies continue unchanged

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