KONE to strengthen its position in China by increasing its ownership in Giant KONE to 80%

KONE Corporation, stock exchange release, May 9, 2011 at 09:00 a.m. EET

KONE Corporation (“KONE”) has agreed to acquire a further 40% stake in its Chinese joint venture Giant KONE Elevators Co., Ltd. (“Giant KONE”) from Zhejiang Giant Holdings Co., Ltd. (“Giant Holdings”). Following this transaction KONE will increase its shareholding in Giant KONE from 40% to 80%. Through this acquisition KONE further strengthens its position and becomes one of the three leading elevator and escalator companies in the Chinese market. The completion of the transaction is subject to approval by relevant Chinese authorities.

The purchase price for the 40% stake is RMB 950 million (approximately EUR 99 million) and will be paid in full on the completion of the transaction. The transaction is expected to be completed during the third quarter of 2011.

Following this transaction, KONE becomes the majority shareholder of Giant KONE. Giant Holdings continues as a shareholder of Giant KONE with a 20% stake. The agreement includes an option for KONE to buy and a respective option for Giant Holdings to sell the remaining 20% stake in Giant KONE to KONE. Giant KONE will continue doing business as a separate entity utilizing the Giant KONE brand.

China is the largest single market for new elevators and escalators in the world. In 2010, more than a half of the world’s new elevators and escalators were sold in China. Giant KONE has grown rapidly to become one of the largest national elevator and escalator companies present in both the new equipment and service market in China. Giant KONE employs approximately 1,800 people in over 40 locations around the country and is headquartered in Nanxun, Huzhou City, Zhejiang Province. Nanxun is located approximately 120 km from Shanghai.

Giant KONE’s orders received in 2010 amounted to approximately RMB 2,100 million (EUR 215 million). Its sales in 2010 amounted to approximately RMB 1,600 million (EUR 170 million). Giant KONE’s profitability has developed very favorably and its IFRS adjusted non-audited EBIT margin in 2010 was approximately 14% of sales. After IFRS 3 adjustments, such as intangible asset amortizations relating to the initial consolidation of the acquisition, the impact of the transaction on KONE’s operating income is expected to be neutral in 2011 and not material in 2012. In accordance with IFRS 3 requirements, KONE will book a one-off gain of approximately EUR 60 million related to the revaluation of the 40% stake held by KONE prior to the transaction. This revaluation will be recorded under the share of associated companies' net income upon the closing of the transaction.

KONE’s President and CEO, Matti Alahuhta: “The cooperation between Giant Holdings and KONE has been excellent throughout the existence of our joint venture Giant KONE since early 2005. Giant KONE has been one of the fastest growing elevator and escalator companies in China during the past years, which has made both parties to the joint venture proud of what we have achieved together. China is a very significant market and this important transaction, following which KONE becomes the majority shareholder of Giant KONE, further strengthens KONE’s position as one of the leading companies in its industry in China. The Chinese elevator and escalator market is growing the fastest in the medium-sized cities in the central and western parts of the country. This acquisition will further expand our product portfolio and geographical reach in these areas.”

Giant Holdings’ Chairman Qian Jiang: “Since its creation in 2005, Giant KONE has grown to be one of the leading Chinese elevator and escalator companies. We are proud of our achievements and of being able to contribute to the strengthening of KONE’s position and business in China. We look forward to continuing to further develop Giant KONE together with KONE in the rapidly growing Chinese market.”

About KONE

KONE is one of the global leaders in the elevator and escalator industry. The company has been committed to understanding the needs of its customers for the past century, providing industry-leading elevators, escalators and automatic building doors as well as innovative solutions for modernization and maintenance. The company’s objective is to offer the best People Flow™ experience by developing and delivering solutions that enable people to move smoothly, safely, comfortably and without waiting in buildings in an increasingly urbanizing environment. In 2010, KONE had annual net sales of EUR 5 billion and approximately 33,800 employees. KONE class B shares are listed on the NASDAQ OMX Helsinki Ltd in Finland.

www.kone.com

For further information, please contact:

Investors and analysts:
Henrik Ehrnrooth, Chief Financial Officer, tel. +358 204 75 4260

Karla Lindahl, Director, Investor Relations, tel.+358 204 75 4441

Sender:

KONE Corporation

Matti Alahuhta, President and CEO

Klaus Cawén, Executive Vice President, M&A and Strategic Alliances, Russia and Legal Affairs