| Journal: TWUK | Section: |
| Title: | Issue Date: 22/05/00 |
| Author: | Page Number: 8 |
| Copyright: Other |
Analysis
The real reason why Preussag jumped into bed with Thomson
Travel Weekly editor Jeremy Skidmore looks at the background and the issues surrounding Preussag’s dramatic takeover of Thomson.
Making a move: Preussag has several arguments for dropping Thomas Cook but clearly it wanted to out-do its German rivalPreussag chief executive Dr Michael Frenzel was the epitome of the cool, collected businessman as he addressed a packed press conference about the £1.8bn takeover of Thomson Travel Group.
Observers could be forgiven for thinking that this was the culmination of a long, well-thought out strategy.
Although there are some compelling arguments for Preussag dumping its 51% stake in Thomas Cook and jumping into bed with Thomson, the takeover was more about one German giant outdoing another.
It’s nearly two months since C&NTouristic made its first approach to Thomson, with a £1.3bn offer. It then increased the bid to £1.45bn and, before Preussag jumped in with an offer of £1.8bn, it seemed Thomson and C&Nwould agree a price of around £1.6bn.
Shortly after C&N bid £1.45bn, Frenzel declared he was very satisfied with his company’s stake in Thomas Cook and that Thomson was too expensive.
So why the sudden change of heart?
Frenzel claims that the turning point was his meeting with Thomson chief executive Charles Gurassa, who convinced him of the potential of the deal.
Gurassa must be some talker – a few words of wisdom and Thomson is suddenly worth several hundred million pounds more.
Frenzel has also argued that the companies are complementary as they both target the premium mass-market sector. But what on earth is Thomas Cook’s brand JMC all about if it’s not targeting the premium mass market?
The truth is that Preussag couldn’t bear the thought of having its market-leading position in Europe overtaken by arch-rival C&NTouristic and hurriedly put together a proposal to buy Thomson.
Preussag had already been beaten to Havas Voyages in France by C&N and felt it was time C&Nreceived a bloody nose.
Sources at Carlson said they were astonished Preussag decided to fly out to Minneapolis on the spur of the moment last week to discuss the position with the US company, which owns 22% of Thomas Cook.
“No-one comes to Minneapolis on the spur of the moment,” the source said.
Even Frenzel admitted the C&N bid for Thomson prompted his response but he insisted it was not about getting one over C&Nchief executive Stefan Pichler.
Frenzel said he had been considering Thomson for some time and that the C&Napproach made the Thomson management think about selling.
But if Thomson had been a long-term objective, why not make an approach when the price was just 69p in February?Frenzel said he would have been drawn into a bidding war for the company. Undoubtedly he would but surely the price wouldn’t have gone as high as 180p a share.
Frenzel’s change of heart has caused him problems – in two trading days the Preussag share price fell 11%.
But whatever the reason for the deal, Preussag/Thomson is set to create the most powerful force in European tour operating, with strengths in the key markets of Germany, the UK and Scandinavia.
It could be a case of Frenzel striking the right deal for the wrong reasons.
n For more coverage see Columnists, page 11 and Cutting Edge, page 74
Preussag claims it is dumping Thomas Cook in favour of Thomson because:
nThomson provides Preussag with significantly enhanced presence in a number of key markets in Europe, including Scandinavia.
nThomson and Preussag are complementary, targeting the premium mass-market sector.
nthe acquisition will provide Preussag with a stronger platform to develop new services and expand into new markets.
nthe purchase will improve utilisation of hotel and aircraft fleet capabilities.
ninformation technology development will be enhanced.