The UK’s leading travel firm Tui Travel has confirmed it is in talks with German parent group Tui AG on a possible merger.
The London-listed Tui Travel issued a statement this afternoon confirming an approach from Tui AG “which may or may not result in a combination of the two companies”.
Although a legacy vertically integrated tour operator, retailer and airline, Tui, Europe’s largest travel company, is a leading player online through its core brand and sister brands including First Choice and Laterooms.com.
The group said: “Discussions are at a very early stage, but are on the basis that any such combination, if effected, would be achieved not by a reverse takeover but by means of a nil premium all-share merger.”
Tui AG is required to announce by February 13 either a firm intention to make an offer or that it does not intend to make an offer, although the deadline could be extended.
The German group set up Tui Travel with a partial flotation in London in 2007 following the UK merger between Tui and First Choice. However, it retains a 56% stake.
Travel Weekly reported last August that Tui AG was considering buying part of the Tui Travel business. At the time a Tui AG spokesman said: “It has been known for some time we are considering several options.”
The German group has been reported as keen to increase its hold on Tui Travel for at least 18 months. Analyst Morgan Stanley noted last year: “The structure between Tui AG and Tui Travel looks unsustainable and a change appears increasingly likely.”
However, Tui AG lacks the funds for a full takeover and has a market value below Tui Travel’s.
One option would be for Tui AG to take over Tui Travel’s German business. Another would be for the groups to combine through an equity swap – an option today’s announcement confirms the pair are discussing.