Thomas Cook-MyTravel to merge – UPDATED

MyTravel and Thomas Cook have agreed a merger in a move which will put intense pressure on Thomson and First Choice and spark further European tour operator consolidation.

The parent company of the planned enlarged group will be named Thomas Cook Group, headquartered in the UK and listed in London.

The merged company would combine Thomas Cook AG’s 33 tour operating brands, 2,400 travel agencies, 66 aircraft and almost 20,000 staff with MyTravel’s 17 brands, 31 aircraft and 13,000 staff worldwide. 

MyTravel handled 5.5 million holidaymakers in 2005-06 and made a pre-tax profit of £44 million, while Thomas Cook AG is the second largest European travel group after TUI. Thomas Cook UK & Ireland made a profit of more than £87 million in the last financial year.

MyTravel and Thomas Cook believe that the annualised pre-tax cost benefits arising from a combination of the businesses will be at least £75 million a year once the full benefits of the merger are realised.

The deal is subject to clearance by relevant competition authorities and is conditional on the sale of Lufthansa’s 50% holding in Thomas Cook to German department store group KarstadtQuelle. The board of MyTravel is to unanimously recommend the merger.

Staff at both groups will be affected by “operational restructuring” if the deal goes ahead due to the combination of similar functions, according to a joint statement. 

The merger will result in the enlarged group being 52% owned by Thomas Cook’s German parent company KarstadtQuelle and 48% owned by the shareholders of MyTravel.

It is expected that the merger will be completed by June 2007, subject to any competition issues being resolved.

MyTravel and KarstadtQuelle have agreed not to pursue any competing transaction – ruling out MyTravel and Thomas Cook bidding for the First Choice mainstream business. First Choice shares slumped by more than 40p on the news.

“The enlarged group will have leading positions in the UK and Ireland, Germany, Scandinavia, Benelux, France and Canada,” a statement said. “It will also benefit from a portfolio of excellent brands, an experienced management team with a proven track record and a diverse geographic spread, which together will provide a strong platform for growth.”

The merged businesses will be led by a board drawn from MyTravel, Thomas Cook and KarstadtQuelle, complemented by additional independent non-executive directors.

It will be chaired by Thomas Middelhoff, CEO of KarstadtQuelle and chairman of Thomas Cook, deputy chaired by Michael Beckett, chairman of MyTravel. It will be managed on an interim basis by joint chief executives, MyTravel chief Peter McHugh and his Thomas Cook counterpart Manny Fontenla-Novoa.

MyTravel’s Beckett said: “This transaction gives MyTravel shareholders the opportunity to participate in the significant value creation being offered by industry consolidation. 

“Thomas Cook is a household name and the joining of the two groups will create an even stronger force in this highly competitive market. The enlarged group, which will be based in the UK and listed in London, will benefit from a strong and independent board and an experienced executive team.”

Middelhoff said: “We are delighted to see the merger of two such well established industry players which we are sure will achieve significant value creation for us as shareholders from this geographically diverse portfolio of companies. 

“We look forward to being a long-term, committed investor in the enlarged group.

“The Thomas Cook team is looking forward to building and growing the enlarged group together with the MyTravel team. The combined organisations will offer customers unrivalled choice and quality for their holiday and leisure time in all of the markets in which we operate.”

by Phil Davies