Hapag-Lloyd IPO Is Unlikely Before Late Next Year, TUI Says

TUI AG doesn’t expect to exit its stake in Hapag-Lloyd AG, Germany’s biggest container shipping line, through an initial public offering before the second half of next year, Chief Executive Officer Friedrich Joussen said.

To place the 22 percent stake on the market now would “waste value,” and it’s more sensible to wait until the new CEO Rolf Habben-Jansen takes the helm at Hapag-Lloyd next year, he told reporters at a Hamburg press club last night. Habben-Jansen joins the board in April and becomes CEO in July.

“Even if a good moment for an IPO would be in 2015, I wouldn’t have a problem with that,” Joussen said, adding that the “desire” for an IPO among Hapag-Lloyd’s shareholders, which include the city of Hamburg and billionaire businessman Klaus-Michael Kuehne, has grown in the last six months.

TUI, Europe’s biggest travel company, has repeatedly said that its wants to divest its stake in Europe’s fourth-biggest container liner through an IPO or a sale once the market improves after a prolonged freight slump.

An IPO is much more likely than a sale, said Joussen, who took over from Michael Frenzel in February. Talks to merge Hapag-Lloyd with local rival Hamburg Sued failed in March.

“But I don’t think we need two, three good quarters before we can do a good IPO,” Joussen said. Container shipping is a cyclical business, so “we have to act as soon it is getting better.”

Steering Away

Habben-Jansen, the head of A.P. Moeller-Maersk A/S’s freight-forwarding arm Damco NV, will succeed CEO Michael Behrendt, Hapag-Lloyd said Sept. 24. The company is attempting to steer its way out of the crisis of the industry, which is grappling with an overcapacity of vessels and low freight rates.

TUI has struggled to maintain profitability as consumers increasingly book flights and hotels on the Internet, and it failed to build up a strong presence in the thriving cruise ship market.

The stock rose 0.8 percent to 9.30 euros at 11:28 a.m. in Frankfurt and has gained 38 percent in the past year.

A merger with TUI Travel Plc, in which TUI AG holds a majority stake, isn’t “possible” today because of the equity value of both companies, with the 56 percent stake in the U.K. travel company being worth more than the market capitalization of its parent company, said Joussen. “Our currency is diluted and the currency of TUI Travel is comparatively high. That’s why you can’t do a takeover with shares.”

Hotel Outlook

A merger may be possible in two years, if the equity situation changes, he said. “But we might see in two years that tour operators aren’t creators of value anymore but rather the hotels, so why should you invest in that area then,” he said. “And we already have got control over strategy and budget today, so we might not have to take over TUI Travel.”

The travel company, TUI AG’s biggest profit generator, raised its full-year underlying operating growth forecast yesterday to at least 11 percent from 10 percent previously. Summer programs across mainstream markets were almost fully sold and the holiday season was ending with higher average selling prices across all key markets, the company said. The travel company also said it’s confident it will offset the effect of political events in Syria and Egypt.

“If TUI Travel is doing well, we are also doing well,” said Joussen, adding that as majority shareholder he wants to see the British company generate more cash, which should partly be used to cut TUI Travel’s debt. “TUI Travel is gaining really good market share, but with regard to cash conversion it’s not that super.”

‘Equal Footing’

TUI AG needs to be transformed from a tour operator with hotels with a “less-than-fair-equity-value” to a company where these two parts “are on equal footing,” he said. To make that happen, he will reverse TUI’s cash burn, said Joussen.

“When I started at the company, I noticed that TUI AG makes minus 120 million euros cash per year and it is pretty clear that we will have a problem if we don’t manage a turnaround here,” said Joussen, the former head of Vodafone Group Plc’s German business. “I made a commitment that we will see plus 100 million euro cash per year by 2014/2015.”

A better cash position will help TUI to resume dividend payments, he said, without elaborating further. TUI last paid a dividend in 2008.

To cut costs, TUI sold a company jet, ended sponsorship agreements for sport clubs and events and will have cut the number of jobs at its headquarters to less than 100 by Sept. 30 from more than 200 previously.

Before it's here, it's on the Bloomberg Terminal.