Tui Group shed light on its M&A strategy at the latest Travel Weekly Business Breakfast. Lee Hayhurst reports
Travel giant Tui is more likely to acquire hotels in long-haul destinations than it is to buy other travel firms, following the Tui Travel and Tui AG merger.
Christine Franks, Tui Group’s head of M&A, said it would make sense for Tui to build the content side of its business.
She suggested hotels in places such as the Caribbean, Maldives or Thailand that it can serve with Dreamliners as sensible targets.
But, speaking at the Business Breakfast, Franks said Tui was unlikely to be a leading player in mergers and acquisitions in the travel sector while it focuses on bedding in the recent merger of its UK plc with its German parent.
“With acquisitions at the moment, I do not think we are going to be leading the charge,” Franks said. “Opportunities will arise, but we are still in a phase of digesting the merger.”
The merger of London-listed Tui Travel with Tui AG was sealed on December 17, 2014, with the firm saying it had created the “world’s number-one integrated leisure tourism business”.
Franks became part of Tui Travel following its 2007 merger with First Choice, which she joined in 2005. She was formerly business development director of Tui’s specialist and activity division, which was grouped along with its online accommodation businesses in the merger.
Asked about speculation that this division is being primed to be sold off, either as a group or individually, Franks said Tui was in no rush to make a decision.
Tui has insisted the division, which includes accommodation supplier Hotelbeds as well as specialist operators such as Hayes & Jarvis, Crystal and Citalia, is being run to “maximise value”.
Franks said: “It’s a huge portfolio of brands, and some of those are highly integrated into our mainstream business.
“Some are performing really well, some are underperforming.
“What we need to establish now is how to turn some of those businesses around and whether we are going to sell them or keep them in a group. We are not in a hurry.
“We need to take a measured approach and give the managers of the businesses time to assess what they are going to do and how they are going to drive growth.
“Are we going to sell in the next two or three months? No.”
Delegates heard there was a huge amount of potential investment available both in corporate balance sheets and in private equity houses looking for investment opportunities.
Travel was said to be a highly prized sector for potential investors due to the cash-generative nature of the business and its potential for growth by tapping into customer and demographic trends.
Tom Salmon, director of private equity firm 3i, said: “M&A activity involving UK companies as buyers or sellers for the first eight months of the year was at the highest level since 2007.
“There is a huge amount of capital out there. There is 40% more cash on corporates’ balance sheets today than just before the [economic] crisis in 2008. That cash needs a home.
“There is also about 20% more ‘dry powder’ in the hands of PE firms than in 2007.
“Those two factors means there is still huge competition for deals that come to market.”