| Journal: TWUK | Section: |
| Title: | Issue Date: 12/06/00 |
| Author: | Page Number: 8 |
| Copyright: Other |
Analysis
Clock starts ticking as TUI sets timescale for Thomson takeover
TUI expects to finalise its acquisition of Thomson Travel Group by September. Steve Jones reports from the German giant’s headquarters in Hanover
LONG before the last of Thomson’s holidaymakers return to British shores this summer, the operator is almost certain to be in German hands.Preussag will this week lodge its official offer for Thomson Travel Group and at the same time be set a timescale by the merger taskforce for selling off Thomas Cook.
The deal will join Thomson with Preussag’s TUI tour operation to create a group with a joint turnover of £7.5bn – £4bn more than Airtours, which is now expected to strike a deal with C&N. First Choice is also now beginning its European expansion with the £77m acquisition of Ten Tour.
In an exclusive interview with Travel Weekly, TUI executive board chairman Dr Ralf Corsten predicted the £1.8bn bid for Thomson could be completed by the end of September.
“We started speaking to the merger taskforce in Brussels before the offer to Thomson shareholders and we are continuing to speak to them,” said Dr Corsten. “We have to confirm that we are prepared to disengage from Thomas Cook and from June 12, when we launch our official bid, there will be a time limit of six or 12 months to dispose of Thomas Cook.”
Explaining the rationale behind the deal, Dr Corsten said the two groups have built strong brands and enjoyed close links.
“We both started early with integration – Thomson stronger than we did – which brings together two complementary businesses,” he said. “We have collaboration in destinations with Thomson using our incoming companies, of which we have 18 and Thomson three. Thomson is number two in our own hotels.
“It also has a cost-conscious airline and long-haul aircraft. Hapag Lloyd only has medium haul, so long haul in future will be done for the group through Britannia.”
The deal also raises the combined bed stock to more than 100,000, giving the group a 46% share in the Spanish market.
“The British began the integrated chain but for 15 years, getting good bed stock has been a speciality of TUI. We have enlarged our hotels aggressively as we could see it playing an important role. You can influence the quality of your product this way.”
The deal was a huge disappointment for Thomas Cook which now looks certain to be taken over by Carlson, although other parties are said to be interested. In a further blow for Thomas Cook, TUI has classified JMC as a budget mass-market operator.
“Thomas Cook did an excellent job bringing JMC to the market but it’s new and is not a brand in the premium mass market,” he said. “The fit with the Thomson brand and product is better.”
He declined to comment on possible changes at Thomson but stressed the management will be free, within reason, to make its own business decisions.
“Of course, there will be procedures being part of a group but for the size of a company like Thomson, the management needs some freedom to make the decisions,” he said.
He denied claims that Thomas Cook was effectively run from Hanover, insisting all its subsidiaries have freedom.But it is thought that Thomas Cook was reeled in by TUI when the German giant took a 50.1% controlling interest.
“Thomas Cook used to be controlled by a bank and there are no synergies between a bank and a tour operator,” said one observer. “There was always going to be a closer working relationship when Preussag came in as there were obvious synergies between Thomas Cook and TUI.”
Dr Corsten disputed the belief that the British accept lower quality and pay less for their holidays but it will not attempt to distance Thomson from the price-driven market in the UK. “It will be hard to get out of this market,” he said. “We (Germany) did not train the customer in the same way he has been trained in the UK.”
He added, however, that German tour operators, like the UK, exist on tight margins.
Turning to the issue of European consolidation, Dr Corsten said further growth was inevitable – France and Italy are targets for TUI – but declined to predict who would align with who.
Dominant: a deal between Thomson and Preussag will give the partnership a 46% share of the Spanish market and Dr Corsten believes securing bedstock is crucial for future growth