Agreement has been reached on the terms of the proposed merger between TUI Travel and Germany’s Tui AG, the two travel giants confirmed this morning.
The combined group will have a value of approximately €6.5 billion (£5.2 billion).
A majority of shareholders of the two firms must now vote in favour of the merger if it is to go ahead. Resolutions are expected to be put to shareholders by the end of next month.
Corporate streamlining will lead to potential cost savings of at least €45 million (£36 million) a year in addition to a seven per cent fall in tax rates to 24%.
Additional cost savings are expected to be achieved through the integration of inbound services into the mainstream tourism business, resulting in net cost savings of €20 million (£16 million) a year.
The deal will see the creation of the world’s number one integrated leisure tourism business, “clearly positioned as a fully vertically-integrated tour operator with enhanced long-term growth prospects”.
The agreement provides the potential for the combined group to double the pace of existing Tui AG content growth through further vertical integration – more than 30 additional hotels and up to two additional cruise ships
Historic annual performance suggests a potential contribution to earnings of €1.4 million (£1.1 million) per hotel and a substantial contribution per ship under the Tui Cruises business model.
Acceleration of content growth is expected to drive customer and top-line growth, the two companies said.
Peter Long and Friedrich Joussen will be joint CEOs of the combined group, with Long to become chairman of the supervisory board of Tui AG and Joussen leading the combined group as sole CEO from February 2016.
Long said: “The merger will strengthen and future-proof our combined business by enhancing the certainty of long-term unique holiday growth, and by reinforcing our competitive advantage through further control over the end-to-end customer experience.
“Friedrich Joussen and I are committed to working closely to ensure that we achieve significant synergies, cost savings, commercial benefits and long-term growth as the world’s number one integrated leisure tourism business. All of which will contribute to significant earnings accretion from the first full financial year post-completion and growth in shareholder returns.”
Joussen said: “We have conducted the negotiations goal orientated, seriously and fairly and have completed them successfully. The result is a clear and joint commitment to the merger of the companies.
“The potential cost savings are significantly higher than expected at the start of the negotiations.
“The new Tui will be the leading integrated tourism group in the world and an innovative pioneer in the industry.
“We will set new standards in our industry with respect to growth, quality as well as brand promise and create significant opportunities for shareholders, customers and our employees.
“Our shareholders benefit from faster growth, higher margins and an attractive dividend policy. Our customers receive unprecedented access to exclusive products and services and thereby individual and unique holiday experiences around the globe.
“Our 74,000 employees worldwide in approximately 130 countries will have completely new development and career prospects. The new Tui will definitely be a truly international group and thus also one of the most international employers in Europe.”