Top EU tour group revives $7.5bn merger talks
Paris, June 28, 2014
Europe's biggest tour operator TUI Travel and its majority owner TUI AG plan to merge in an all-share, nil-premium deal worth around £4.4 billion ($7.49 billion) to cut costs and create the world's largest leisure tourism group.
Investors have long expected such a tie-up since TUI Travel was created in 2007 from the merger of Britain's First Choice and the travel business of TUI AG, which now owns around 55 per cent of the London-listed firm.
The two companies last held merger talks back in 2013 but a deal collapsed after TUI AG said an offer would not make sense given their share prices at the time.
Since then, shares in TUI AG have risen 65 per cent as chief executive Friedrich Joussen implements cost cuts and improving results at its hotels and cruises units.
Shares in TUI Travel, meanwhile, have gained 44 per cent.
"From a timing perspective, it has become very attractive with all the work Joussen has done at TUI AG over the last 18 months," TUI Travel chief executive Peter Long said.
"And what's different to last time is that we have the terms of a possible deal that have been agreed by both boards."
The two said a deal would result in potential cost savings of at least 45 million euros ($61 million) a year as they cut out overlapping functions and delist shares from Germany, plus a tax benefit - which, had they been a combined company last year, would have totalled 35 million euros due to carried over tax losses in Germany.
Under the plan, TUI Travel shareholders would receive 0.399 new TUI AG shares. The two said a firm merger offer would be made after mid-September, with closing expected by spring 2015. Long said he hoped the closing would be nearer the start of 2015.
As the deal is nil premium, the value of an eventual offer will be based on the average value of the TUI Travel share price in the run-up to the announcement. On the day before the merger plan was announced, TUI Travel had a market value of £4.4 billion.
The combined group will comprise the main tour operations of TUI Travel and also the hotels and cruise units of TUI AG, which have 232 hotels.-Reuters