27th Jun 2014 14:53
LONDON (Alliance News) - TUI AG Friday said it will buy the minority of UK-based holiday operator TUI Travel PLC that it doesn't already own in a deal worth about GBP2 billion, a move that ends years of speculation that it would eventually take full control of its travel unit.
TUI Travel was formed in 2007 after TUI AG agreed to merge its travel business with First Choice Holidays PLC of the UK. At that time, TUI had a 51% stake in the combined company while First Choice shareholders owned 49%. Since then, analysts have speculated that TUI would one day buy out what effectively became its British travel unit.
"Its always been a compelling logic to bring the two businesses together," Peter Long, chief executive of TUI Travel told journalists Friday.
For TUI, the deal will bring together the travel business with its existing hotels and resorts business and its cruises joint venture with Royal Caribbean Cruises Ltd. TUI also has a leftover stake in container shipping business Hapag-Lloyd, but wants to sell it having sold a majority stake in 2009.
"Our strength would come from the combination of a global tour operator business, six airlines as well as a unique portfolio of tourism products including hotels, clubs and cruise lines. This also provides us with a competitive advantage for the ongoing digitalisation of the tourism sector," Friedrich Joussen, chief executive of TUI AG and chairman of TUI Travel, said in a statement.
TUI Travel shares were up 4.4% at 407.20 pence Friday afternoon, having hit an intraday high of 420.20p immediately after the announcement.
TUI Travel, the owner of Thomson and First Choice, said the all-share, nil-premium merger, would deliver a number of strategic and financial benefits, including potential costs savings of at least EUR45 million per year, largely because there will be no duplication of head offices. The combined company would be headquartered in Germany, but would be listed on the London Stock Exchange, where TUI Travel is already a FTSE 100 constituent, in parallel with a German listing.
"There will be revenue synergies by accelerating growth of more hotels and cruise ships, which will give us further income," Long told journalists.
The deal is worth approximately GBP2 billion, as TUI AG is the biggest shareholder in TUI Travel with a current stake of 54.5%.
TUI Travel has a market value of GBP4.56 billion, while TUI AG has a market capitalisation of around EUR3.27 billion, giving the combined firm a market value of around EUR5.8 billion at current prices.
Under the terms of the deal being discussed, TUI Travel shareholders would receive 0.399 new TUI AG share for each TUI Travel share they own. TUI Travel said Alexey Mordashov, the largest shareholder in TUI AG, supports for the merger.
The merged entity will have two chief executive officers - both TUI Travel's Peter Long and TUI AG's Friedrich Joussen - up until February 2016, after which Long will become chairman of the supervisory board, and Joussen would lead solely as CEO.
TUI Travel said in its statement Friday that talks are ongoing, and there can be no certainty that an offer will be made.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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