TUI plans to merge its tourism operations with First Choice
Holiday group First Choice is reportedly in advanced talks to merge with Thomson Holidays, resulting in a travel company with Ł12bn of sales. (3/19/2007)
As per the information available, under the proposed all-share deal, which could come as early as today, Thomson’s German-owner TUI will combine its tourism division with First Choice, creating a company with 7.2m customers and a market value of more than Ł3bn. First Choice is currently valued at Ł1.5bn. TUI investors are expected to hold the majority of the shares in the new company.
First Choice chief executive Peter Long is expected to head the combined business. It is not clear whether Peter Rothwell, boss of Thomson Holidays, will stay following the deal.
According to telegraph.co.uk: “The deal will leave TUI, which is valued at around Ł3bn, focused on its Hapag-Lloyd container shipping line. The tie-up with First Choice will be seen by some analysts as a defensive move. Market research firm Mintel estimates the package holiday market will drop by 1pc in size over the next five years while independent holidays are forecast to enjoy explosive growth of 45pc. First Choice has recently focused on its specialist holidays wing.”
The report added: “With a reduction in costs being a clear objective of the merger, First Choice and Thomson staff will be anxious to hear how the savings will be made. MyTravel and Thomas Cook, for example, are aiming for Ł75m of cost cuts a year including job losses.”
TUI, based in Hamburg, has already slashed costs. About 3,600 jobs are going across its tourism business, including 2,400 in the UK.
Last month, the boards of MyTravel and KarstadtQuelle agreed the terms of a recommended merger of MyTravel and Thomas Cook. It was shared that the parent company of the Enlarged Group will be named Thomas Cook Group plc, headquartered in the UK and listed in London. The group will have leading positions in the UK & Ireland, Germany, Scandinavia, Benelux, France and Canada.
“MyTravel and Thomas Cook believe that the annualised pre-tax cost benefits arising from a combination of the businesses will be at least Ł75 million per annum once the full benefits of the Merger are realised. The terms of the Merger will result in the Enlarged Group being 52 percent. owned by KarstadtQuelle and 48 per cent. owned by the shareholders of MyTravel (calculated on a fully diluted basis),” stated an official release.