News Column

German Parent TUI AG To Subsume TUI Travel In GBP2 Billion Deal

June 27, 2014

Rowena Harris-Doughty

LONDON (Alliance News) - Shares in TUI Travel PLC jumped Friday, after the UK holiday operator said it has agreed to merge with its German parent company TUI AG, ending years of speculation about such a buyout.

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.

"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, the owner of Thomson and First Choice, said the possible 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. 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.

The deal is worth approximately GBP2 billion, as TUI AG is the biggest shareholder in TUI Travel, already holding a 54.5% stake.

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 EUR5.86 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.

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.

TUI Travel said in its statement Friday that discussions remaining ongoing, and there can be no certainty that an offer will be made.

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Source: Alliance News

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