Finnish builder YIT to buy rival Lemminkainen in stock deal

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UPDATE 1-Finnish builder YIT to buy rival Lemminkainen in stock deal

(Adds comments, share reaction, detail, background)
    HELSINKI, June 19 (Reuters) - Finland's largest construction
company YIT <YTY1V.HE> will acquire rival Lemminkainen
<LEM1S.HE> for 632 million euros  ($707 million) in an all-share
deal aimed at boosting growth, the firms said on Monday.
    The acquisition will give YIT the size to compete better in
its core Nordic markets as well as Russia, following a drop in
profits due to the Ukraine crisis, Russian recession and
weakened rouble.
    Lemminkainen shareholders will receive 3.6146 new shares in
YIT for each share held, valuing Lemminkainen at 27.29 euros per
share, a 40 percent premium to its closing price on Friday.
    Shares in Lemminkainen jumped 40.6 percent to 27.34 euros,
while YIT was 4.8 percent higher at 0837 GMT.
    "The combination is 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," the firms said.
    The combined company will have sales of about 3.4 billion
euros and it is expected to generate annual synergies of some 40
million euros by 2020. YIT shareholders will own 60 percent of
the firm and Lemminkainen's owners the remaining 40 percent.
    "It makes sense, both companies needed more size. Synergies
seem to be very significant if they can achieve them. The
businesses complement each other with not very much overlaps,"
said Kepler Cheuvreux analyst Hjalmar Ahlberg, who has a "hold"
rating on YIT's stock.
    The deal is subject to approvals by shareholder meetings due
on September, as well as competition authorities.
    The company and analysts said they were not expecting
objections from antitrust authorities as big Swedish players NCC
<NCCb.ST> and Skanska <SKAb.ST>, as well as smaller local
rivals, are active in the Finnish market.
    More than half of YIT's and Lemminkainen's combined sales in
2016 came from Finland, while the rest was generated in other
Nordic and Baltic countries, Russia and Central Eastern Europe.
   ($1 = 0.8934 euros)

 (Reporting by Jussi Rosendahl; editing by David Clarke)
 ((jussi.rosendahl@thomsonreuters.com; +358 9 6805 0248; Reuters
Messaging: jussi.rosendahl.thomsonreuters.com@reuters.net))


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