German TUI AG could be just six months away from acquiring a larger stake in Europe’s largest tour operator Tui Travel, according to weekend reports.
The Reuters news agency quoted sources close to the company as saying that proceeds from the planned divestment in shipping group Hapag-Lloyd would be used to build up its share in the tour operating group. TUI AG owns about 55% of Thomson and First Choice parent Tui Travel which has a market value of almost £3 billion.
“There are plans to float (TUI AG’s) Hapag-Lloyd within the next three months, and TUI is likely to buy TuiTravel shares within another 3-4 months after that,” one of the sources was quoted as saying.
TUI has calculated its investment in Hapag-Lloyd – in which it holds just under 50% – at €2.5 billion, but experts believe that TUI will not sell the whole Hapag-Lloyd stake at once, and rather keep some shares to benefit from a possible share price rise following the IPO.
“The management has to act swiftly to prevent whetting the appetite of its owners for a special dividend,” another source close to TUI told the news agency. Some main shareholders involved in preliminary talks have for now agreed to see the Hapag proceeds invested in TUI’s tourism business, one of the sources said.
Strengthening ties between TUI AG and Tui Travel could create annual synergies and save taxes of a combined €700 million to €800 million, sources have said.
A TUI spokesman said that “there is no firm timetable for the several options TUI has”. TUI AG chief executive Michael Frenzel has said in the past that funds from the sale of the Hapag-Lloyd stake could be put into the tourism business.
TUI and the Hapag-Lloyd shareholder group Albert Ballin picked three investment banks last month to prepare a possible flotation of a stake in the world’s fifth biggest container shipping company this year.
Renewed speculation that TUI AG was interested in upping its stake in Tui Travel emerged after the discovery of a £117 million black hole in Tui Travel’s accounts which was explained as an error in the Thomson accounting system.
It is understood key people in the German parent were unhappy that the issues could potentially reflect badly on them and were keen to take further control of the UK plc to ensure there was no further embarrassment.