TUI AG, the owner of Europe’s largest travel company, rose in Frankfurt trading after saying it will sell a stake in Hapag-Lloyd and may dispose of its remaining holding in the shipper in an initial public offering.
TUI will sell a 17.4 percent stake to investor group Albert Ballin for 475 million euros ($626 million), leaving it with 22 percent of the shipping unit, the company said in a statement late yesterday. The travel operator is “very well booked” for cruises, Chief Financial Officer Horst Baier said today, reiterating a prediction that sales will increase in 2012.
TUI shares rose as much as 6.6 percent. The company postponed a planned IPO for Hapag-Lloyd last year because of turmoil in global equity markets. It said in December that its executive board resolved to sell most of its stake to Hamburg-based Albert Ballin. By pulling out of the shipping industry, TUI can focus on its tourism business and expansion in Russia, China and India, Baier said in November.
“To completely exit container shipping, TUI will obtain the right to call for an IPO with priority placement of the shares held by TUI any time as of end of June,” the Hanover, Germany-based company said.
The stock was up 5.1 percent at 6.52 euros as of 12:08 p.m. in Frankfurt. That boosted TUI’s gain this year to 36 percent.
TUI said that a decline in vacation bookings to North Africa caused its underlying operating loss in the three months through December to widen to 147.3 million euros from 119.6 million euros a year earlier. Political unrest in North Africa cut earnings by 30 million euros, the company said.
“Lower demand for North African destinations in the first quarter had been anticipated and incorporated accordingly in the annual budget,” TUI said. The company “expects moderate turnover growth and a slight improvement in operating earnings” for the year. Full-year results will be “positive,” it said.
Thomas Cook Group Plc, Europe’s second-largest tour operator, is selling assets and shuttering shops after reporting a loss of 521 million pounds ($818 million) in the fiscal year ended Sept. 30. It negotiated an emergency 200-million-pound bank loan in November to help reorganize its business.
TUI’s travel bookings are “showing further improvement, with volumes increasingly benefiting from the distress of Thomas Cook in the U.K.,” said Johannes Braun, a Frankfurt-based analyst at Commerzbank AG.
TUI plans to expand in Russia and Ukraine, while China, India and emerging markets contain millions of prospective customers, Chief Executive Officer Michael Frenzel said at today’s annual shareholder meeting. Online expansion is also a priority as “mobile offerings” will play a bigger role, the CEO said.
Frenzel said TUI has identified savings potential of 126 million euros, which will be delivered over the next three years. The CEO said he is aware of the company’s “obligation to resume payment of a dividend as soon as possible.”
TUI’s travel prices are “relatively firm due to ongoing tight capacity control and a high level of differentiated products,” Braun said.
Albert Ballin’s investment group, which comprises Hamburg’s state government, Klaus-Michael Kuehne, Signal Iduna, Hanse-Merkur, M.M. Warburg & Co. and HSH Nordbank AG, is Hapag-Lloyd’s majority shareholder and will own about 78 percent after the deal is completed.
Hapag-Lloyd will redeem 100 million euros of financing and Albert Ballin will acquire 125 million euros of hybrid capital from TUI. The deal will bring 700 million euros of cash to TUI by the end of June.
As part of the deal, Hapag-Lloyd will submit a buyback offer to TUI in April 2013 to repurchase Hapag-Lloyd shares valued at 37.5 million euros so that TUI’s stake will decline further. Besides an IPO, TUI has the right to sell Hapag-Lloyd shares to third-party investors, it said in yesterday’s statement.
The reduction of TUI’s stake is subject to approval by the shareholders of the Albert Ballin group. TUI holds a majority in U.K.-based TUI Travel Plc, Europe’s largest tour operator.
Frenzel told shareholders in Hanover today that the purchase price of its agreement with the Albert Ballin group is “fair” and is confident TUI will completely exit the shipping industry “as soon as the market environment opens up.”