Kone Plans Sale of TK Elevator European Assets Worth Up to €5 Billion
Key Facts
Kone plans to sell assets tied to TK Elevator’s European operations for between €4 billion and €5 billion, according to a report published by the Financial Times on October 26 and cited by Investing.com. The plan is part of an effort to address competition concerns over Kone’s planned acquisition of the German elevator company; it is not a completed sale. Reuters previously reported, citing two people familiar with the matter, that Kone intended to put most of TK Elevator’s European business up for sale. Those operations include elevators, escalators and related services. The planned acquisition is valued at about €29.4 billion, making the size and scope of the assets on offer factors in the deal’s regulatory approval process.
Estimates in circulation point to a difference between the value of the assets expected to be offered and the scale of the divestment Kone may actually need to make. In an earlier estimate, Citi set a base-case scenario involving the sale of €3 billion of TK Elevator operations, alongside an alternative scenario covering all European operations at about €5 billion. The €4 billion to €5 billion range cited in the October 26 report refers to the value of assets tied to the European operations Kone plans to sell, but does not confirm that all European activities will be sold. Citi analysts previously estimated that European divestments could generate proceeds of €2.1 billion. The variation in these figures reflects differences in scenarios and estimates, not proceeds from a sale that has been announced as final.
The potential sale is linked to a review of the merger’s effect on competition in the European elevator market. Kone said some businesses might need to be sold as remedies in certain areas to secure regulatory approvals, while reiterating its commitment to delivering annual synergies of €700 million from the deal. The company previously said the combined group could record annual sales of about €20.5 billion, with around 65% coming from maintenance and modernization services. Those figures relate to the group after the merger, while potential regulatory negotiations focus on assets that could be separated or sold to address competition concerns. In Britain, the Competition and Markets Authority invited interested parties to submit their views, saying this marked the start of information gathering and that it had not yet launched a formal Phase 1 investigation.
A Bloomberg report said Mitsubishi Electric and Fujitec were among the companies considering potential bids for the assets, without confirming that any offer had been made or a buyer selected. The two companies’ interest remains a possibility under consideration, while neither the outcome of the sale process nor details of how the assets might be allocated have been announced. Potential Japanese buyers give the process a competitive dimension, but what is ultimately offered will depend on the scope of divestment required as part of the regulatory review. TK Elevator’s European sales had reached about €2.5 billion, equivalent to 27% of its sales in the year before the Reuters report. These figures indicate the commercial scale of the operations that could be included in the sale, but do not by themselves determine their final value.
On the deal’s valuation, Citi said Kone’s acquisition of TK Elevator remained financially attractive, even under the larger divestment scenario. It estimated that the deal could increase earnings per share by about 10%, with discounted cash flow valuation sensitivity at around €65 per share. It added that the October 26 report did not change its estimate of the likelihood of the deal closing, and that it still saw a positive risk-reward balance for the stock over a 12-month horizon. This is the analysts’ assessment of the deal and the stock, not confirmation that the acquisition will close or that those results will follow. The available information does not include a specific change in the share price after the report.
Attention is turning to when the sale process will begin and what concessions regulators will require. Two Reuters sources expected the sale of the European businesses to begin in autumn 2026, while one said it could start in November. Kone’s chief financial officer told Reuters that completion of the acquisition of TK Elevator was not expected before the second quarter of 2027 at the earliest. Kone’s extraordinary general meeting approved the proposed resolutions related to the deal on June 3, including authorization to issue up to 270 million new class B shares to be given to the seller as part of the consideration. The asset sale and competition review remain steps that must precede a final decision on the acquisition.