Finnish contractors Lemminkäinen and YIT are to merge, claiming that the combination would create a financially strong company with urban development as the engine for growth and profitability.
The boards of Lemminkäinen Corporation and YIT Corporation announced the merger this morning, and said the companies’ business areas would complement and balance each other.
The preliminary annual revenue of the combined company is put at approximately €3.4 billion, with operating profit estimated at approximately €85 million. The combined company will employ around 10,000 employees located in 11 different countries.
Lemminkäinen and YIT said the merged operation was expected to create significant value for the shareholders of the combined company through decreased sensitivity to economic cycles and improved competitiveness providing a strong platform for growth.
They said that total synergies were expected to be approximately €40 million annually, and that they were expected to materialise in full by the end of 2020.
The mechanics of combining the two companies will mean that Lemminkäinen will be merged into YIT.
Lemminkäinen’s shareholders will receive 3.6146 new shares in YIT for each share in Lemminkäinen owned by them, corresponding to an ownership in the combined company after completion of 60% for YIT shareholders and 40% for Lemminkäinen’s.
The completion of the merger is subject to approval by Extraordinary General Meetings of YIT and Lemminkäinen, which are currently expected to be held on September 12, 2017, as well as approvals from competition authorities.
The companies said that the combined company had obtained necessary commitments for the financing of the completion of the merger, which is intended for completion on either November 1, 2017, or January 1, 2018.
Berndt Brunow, chairman of Lemminkäinen, said, “During the last three years, Lemminkäinen’s management has focused on a turnaround – strengthening the company’s financial position as well as operational efficiency.
“This unique merger in the Finnish construction industry creates a significant company on a Nordic scale.”
He added, “The combined company has a strong financial position, strong cash flow and over 100 years of experience from the construction industry. The synergies from the merger are significant. They will enable the combined company to become also a competitive player on the Northern European markets.”
Matti Vuoria, chairman of YIT, said, “Lemminkäinen and YIT are both increasingly international, solid Finnish companies with more than 100 years of history and a versatile know-how and strong foothold in their operating areas.
“The combination of YIT and Lemminkäinen creates a strong Northern European playmaker and a reformer.”
For Kari Kauniskangas, president and CEO of YIT, the merger was a strategically important step for both companies.
He said, “It creates a platform for the growth into one of the leading urban developers in the Northern European construction market. I believe that the combination creates a player whose active development work further enhances customer experience and the competitiveness of the company.
“The combination also creates new career opportunities for personnel, for example, in demanding projects combining infrastructure, business premises and housing.”
YIT and Lemminkäinen said they were construction companies operating in the Northern European market, with significant presence in Finland and “reputable brands” in the Nordic countries, as well as in Russia and Eastern Europe.
In recent years, they said, both companies have been adjusting to changing market conditions by focusing on operational and capital efficiency.
They said that with improved and more efficient operations, the companies were well positioned to benefit from the improving market sentiment as well as strengthening their market position and improving profitability.