Published on Thursday, January 17, 2013

TUI Travel confirms merger talks

TUI Travel today confirmed it is discussing the possibility of a cost-cutting merger with 56% German shareholder TUI AG.

The Independent Directors of TUI Travel issued a statement to the London Stock Exchange this afternoon following  press speculation that TUI AG were looking at ways to combine the  German company with its UK business to save over €500 million.

News organisation Reuters suggested TUI Travel might buy TUI AG, a so-called 'reverse merger' as the German travel and tourism group might not be able to raise enough funding to buy TUI Travel, but this was dismissed by the company.

The statement from TUI Travel said: "The Independent Directors of TUI Travel have recently received an approach from TUI AG which may or may not result in a combination of the two companies.

"Discussions are at a very early stage, but are on the basis that any such combination, if effected, would be achieved not by a reverse takeover but by means of a nil premium all-share merger."

It went on to say that, in according with the City Code on Takeovers and Mergers, TUI AG is required to either announce a firm intention to make an offer for TUI Travel or announced that it does not intend to make an offer by 1700 hrs on February 13.

The deadline can be extended with the consent of the Panel.

TUI Travel said the announcement did not amount to an announcement of a firm intention to make an offer and there was no certainty an offer would be made, nor as to the terms on which any offer will be made.

It said the announcement had been made without the consent of TUI AG.

Germany-based TUI AG owns hotels and luxury cruise operations as well as tour operations and a stake in container shipper Hapag-Lloyd. It has for a number of years been looking at how to merge TUI AG and TUI Travel to cut costs and increase combined use of resources, such as hotels.

While TUI AG's is headquartered in Germany, TUI Travel maintains a separate HQ in London. Sources suggested a merger could result in cost savings of between €100 million and €500 million.

TUI AG's two biggest shareholders, Russian tycoon Alexey Mordashov with 25% and Norwegian shipping magnate John Fredriksen with 15%  have lost millions on their investments, said Reuters. Fredriksen is also TUI Travel's second-biggest shareholder with a 5.4% stake.


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  • A wide margin for error I note!

    "While TUI AG's is headquartered in Germany, TUI Travel maintains a separate HQ in London. Sources suggested a merger could result in cost savings of between €100 million and €500 million" I am glad to see the Financial whizzes at TUI have left themselves a wide margin of error in their estimates. Is it not possible to be a little more accurate? It helps with one's own investment portfolio. My initial reaction is to sell TUI and buy T.Cook! The last examples such fluid figures with wide margins plus hazy reporting of take overs and mergers I can remember was Enron.

    By Paul Davis, Thursday, January 17, 2013

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