Adds detail on transaction, share price in paragraphs 4-8, antitrust risks 9-14, cost savings 20,21, context 22-25

By Anne Kauranen and Soren Jeppesen

HELSINKI, April 29 (Reuters) - Finnish lift maker Kone KNEBV.HE said on Wednesday it has agreed to buy German rival TK Elevator (TKE) in a cash and stock transaction valued at 29.4 billion euros ($34.4 billion), a deal that would create ​the world's largest lift maker.

The deal with TKE's private equity owners Advent International and Cinven and other investors marks one of Europe's biggest takeovers in years and is the biggest in Finnish history.

"This combination would meaningfully enhance our ability to meet customers' growing demand for reliable and sustainable solutions and services," Kone CEO Philippe Delorme said in a statement.

The company's shares fell 0.4% by 0843 GMT while Germany's Thyssenkrupp, which owns a 16.2% stake in TKE, rose 9%.

STRENGTH IN MAINTENANCE, SCALE IN U.S.

The merger would give Kone scale in maintenance and modernisation, which analysts say are the most profitable parts of the elevator business.

It would also help Kone, which is strong in Europe and Asia, expand its U.S. footprint, as North America accounted for around a third of TKE's total sales, which stood at 9.2 billion euros in the 2024/2025 financial year.

For the last financial year, the combined group's annual sales would be about 20.5 billion euros, 65% of it from its service and modernisation business, Kone said.

The combined adjusted operating profit (EBIT) excluding any cost synergies stood at more than 2.7 billion euros, the company added.

ANTITRUST HURDLES

The combined company would make Kone the world's largest lift maker by market value, overtaking its biggest rivals, U.S.-based Otis OTIS.N valued at $29.7 billion and Switzerland's Schindler SCHP.S at $36.2 billion.

Japan's Mitsubishi Electric 6503.T and Hitachi 6501.T have bigger market valuations but elevators are only part of their businesses.

Analysts said the deal will likely face close scrutiny by antitrust authorities, given the market is already highly concentrated.

Kone said it was confident it will secure approval, adding that it expected to complete the deal in the second quarter of 2027 at the earliest.

"The parties are prepared to work constructively with regulators to ensure full compliance," Kone said.

Schindler has already said it would challenge the deal.

NEW SHARE OWNERSHIP

Kone will pay 5 billion euros in cash upon the deal closing and issue a further 270 million new shares worth around 15.2 billion euros, corresponding to 33.8% of all issued shares and 18.3% of total votes.

In addition, Kone will take on TK Elevator's interest-bearing net debt, amounting to about 9.2 billion euros, which it plans to refinance.

The new shares will be held by a company called Vertical Topco, owned by Advent and Cinven as well as Thyssenkrupp and other investors.

Kone's chairman, Finnish billionaire Antti Herlin, has separately agreed to buy some 1 billion euros of the new stock, ensuring that he will continue to control more than 50% of the voting rights in the merged company.

Kone shareholders with approximately 74.3% of the total votes have agreed to support the transaction, the group said.

COST SAVINGS OF 700 MILLION EUROS A YEAR

The combination would result in planned cost savings estimated at 700 million euros on an annual basis, Kone said.

"In terms of synergies as a percentage of revenue of the acquired company, this is a pretty impressive deal, or a deal that stands out positively in terms of the industry environment," Danske Bank equity analyst Panu Laitinmaki said.

Kone has had TKE in its sights for years, making a non-binding offer of 17 billion euros for the company six years ago before dropping it due to antitrust risks.

That deal fell through also due to TKE's then-owner, Thyssenkrupp, demanding a 2.5 billion euro advance payment despite an expected year-long delay before Kone would have gained control of the firm, Kone's former CEO recounted later.

Thyssenkrupp sold the lift business to ​Advent International and ⁠Cinven, TKE's current owners, for $18.7 billion in 2020.

Reuters reported last year that TKE's owners were also weighing a potential U.S. IPO as an alternative to selling the business.

($1 = 0.8546 euros)