Looking to a secure future: First Choice group chief executive Peter Long and Kuoni UK chairman and managing director Peter Diethelm believe their merger will put both companies in a strong position
INDUSTRY observers are predicting an intense battle for market share in the UK if First Choice’s proposed merger with Kuoni goes ahead.
The two companies admitted discussions about forming a joint company – to be called Kuoni Holdings – were at an advanced stage. Kuoni would take a 53% stake in the venture, and First Choice 47%. The joint company would be listed on the London and Swiss stock exchanges.
The new company is valued at ú1.5bn, with Kuoni worth slightly over ú750m and First Choice slightly under.
The deal cements the Crawley operator as the fourth player in the market, whereas a deal with either Thomson, Airtours or Thomas Cook would have led to further consolidation.
A city source said:”Four strong players is just too much. There will be a big battle for share and something will give.”
Leisure analyst Michael East added:”First Choice chairman Ian Clubb and group chief executive Peter Long have done extremely well to bring First Choice back to be able to do such a deal.
“But we now have four strong groups in the UK and I’m not sure if the market can sustain their ambitions.”
But Long claimed there was room in the market for four big operators. “If you look at other industries there are more than four players, and anyway, our strategy is to grow profit, not market share,” he said.
First Choice needs to convince its shareholders of the merits of the deal and, in the meantime, a hostile bid for the company is possible. As Travel Weekly reported last week, Airtours, Thomson, Thomas Cook, Bass and Swissair’s parent SAirGroup are all thought to be interested in First Choice.
Long said the proposed merger was of complementary businesses as First Choice was a strong mass-market player and Kuoni an established long-haul brand. The deal also gives First Choice a significant global presence as Kuoni operates in 13 countries.
Kuoni UK chairman and managing director Peter Diethelm said:”To be a major player in Europe we needed a major short-haul business.”
First Choice’s airline, Air 2000, will be used on Kuoni holidays sold in other countries.
Industry observers believeFirst Choice needs to accelerate its plans to build a retail chain to support the enhanced group. British Airways Holidays managing director Roger Heape claimed his company would be in a strong position because Kuoni risked losing support from multiples following its tie-up with First Choice.
But Diethelm said: “We both have good relationships with multiples and we expect that to continue.”
The two companies will maintain their separate identities and First Choice is expected to unveil a brand for its new retail chain at next week’s annual general meeting.
Kuoni Holdings plans to have a board of 14 directors, nine of them executive, drawn from both companies. Clubb would be executive chairman and Long UK managing director.
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