Billionaire Fredriksen Sold TUI Travel to Raise TUI AG Stake

Norwegian billionaire John Fredriksen sold his stake in TUI Travel Plc to buy more stock in parent company TUI AG (TUI1), handing TUI Travel shares their steepest decline in two years.

The shift comes after TUI AG in January retreated from a plan to combine with TUI Travel, in which it owns about a 54 percent stake, according to data compiled by Bloomberg, succumbing to investor pressure to drop a share-based deal. TUI Travel, created in 2007 from a merger of Hanover, Germany-based TUI AG’s travel operations and First Choice Holidays Plc, is Europe’s largest tour operator.

“We see Mr. Fredriksen increasing his stake as positive,” Klaus Mangold, TUI AG’s chairman, said in an e-mailed statement.

TUI Travel shares fell as much as 7.6 percent to 359.90 pence in London today, suffering their biggest intraday decline since Nov. 22, 2011. The stock was down 6.8 percent at 3:30 p.m. local time, after gaining 38 percent this year through yesterday. TUI AG shares gained 1.2 percent to 10.44 euros in Frankfurt.

Fredriksen’s Monteray Enterprises Ltd offered 60.1 million TUI Travel ordinary shares, or 5.4 percent of the stock in an accelerated bookbuild, Goldman Sachs Group Inc. said in a statement yesterday. The offer price was 366 pence a share and Monteray will acquire from Goldman Sachs 8 million shares of TUI AG, or 3.2 percent of its share capital, for about 83 million euros ($112 million), pushing its stake to above 20 percent, according to Goldman Sachs.

Equity Value

A merger with TUI Travel Plc (TT/), isn’t “possible” because of the equity value of the companies, with the stake in the U.K. travel company worth more than the market capitalization of its parent company, TUI AG Chief Executive Officer Friedrich Joussen said on Sept. 26.

TUI AG has a market capitalization of 2.64 billion euros, while its stake in TUI Travel is worth about 2.2 billion pounds, or 2.6 billion euros, after the decline today.

“While this is not a material bear signal for TUI Travel, the transaction suggests he sees limited immediate upside in the TUI Travel share value,” James Hollins, an analyst with Investec Securities in London said of Fredriksen in a note to clients.

Fredriksen is TUI AG’s second-largest shareholder, owning about 15 percent of the stock as of Sept. 30, according to data collected by Bloomberg. The company’s largest shareholder, Russian billionaire Alexey Mordashov, owns 25 percent.

“It’s a difficult situation, and it’s a question of valuation and synergies and so on,” Mordashov said in an interview with Bloomberg television on Nov. 14, when asked if he was pushing the two companies to merge. “Definitely there are some pros and cons.”

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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