* TUI Travel shareholders to receive 0.399 new TUI AG shares
* Nil premium merger, TUI Travel has mkt cap of 4.5 bln stg
* Company to have HQ in Germany, listing in London
* Merger talks had failed 18 months ago
* TUI Travel shares rise to six-week high, TUI AG up 5.7 pct
(Adds comments from CEOs, background, updates shares)
By Victoria Bryan
FRANKFURT, June 27 Europe's biggest tour
operator TUI Travel and its majority owner TUI AG plan to
merge in an all-share, nil-premium deal worth around 4.4 billion
pounds ($7.49 billion) to cut costs and create the world's
largest leisure tourism group.
Investors have long expected such a tie-up since TUI Travel
was created in 2007 from the merger of Britain's First Choice
and the travel business of TUI AG, which now owns
around 55 percent of the London-listed firm.
The two companies last held merger talks back in 2013 but a
deal collapsed after TUI AG said an offer would not make sense
given their share prices at the time.
Since then, shares in TUI AG have risen 65 percent as Chief
Executive Friedrich Joussen implements cost cuts and improving
results at its hotels and cruises units.
Shares in TUI Travel, meanwhile, have gained 44 percent.
"From a timing perspective, it has become very attractive
with all the work Joussen has done at TUI AG over last 18
months," TUI Travel CEO Peter Long told journalists.
"And what's different to last time is that we have the terms
of a possible deal that have been agreed by both boards."
The two said a deal would result in potential cost savings
of at least 45 million euros ($61 million) a year as they cut
out overlapping functions and delist shares from Germany, plus a
tax benefit - which, had they been a combined company last year,
would have totalled 35 million euros due to carried over tax
losses in Germany.
Under the plan, TUI Travel shareholders would receive 0.399
new TUI AG shares. The two said a firm merger offer would be
made after mid-September, with closing expected by spring 2015.
Long said he hoped the closing would be nearer the start of
As the deal is nil premium, the value of an eventual offer
will be based on the average value of the TUI Travel share price
in the run-up to the announcement. On the day before the merger
plan was announced, TUI Travel had a market value of 4.4 billion
TUI AND TUI
The combined group will comprise the main tour operations of
TUI Travel and also the hotels and cruise units of TUI AG, which
have 232 hotels. Joussen, who is looking at expanding the hotels
and cruise business, said the two would be able to grow more
quickly as an integrated group.
Combined, the groups' mainstream leisure tourism businesses
would have annual revenues of 13.4 billion pounds and earnings
before interest and tax and amortisation (EBITDA) of 706 million
TUI AG's 22 percent stake in container shipper Hapag-Lloyd
remains up for sale. TUI Travel's online accommodation
business, such as laterooms.com, and its specialist and activity
businesses, which offer adventure and educational trips for
example, would be operated separately, though that doesn't
necessarily mean they are up for sale right now, Long said.
TUI AG's largest shareholder Alexey Mordashov, who owns over
25 percent and has previously pushed for a tie-up between the
two to simplify their holding structure, supports the deal, the
two companies said in the statement on Friday.
Under the deal, the new group would be incorporated and
headquartered in Germany, but would be listed in London on the
TUI AG's shares would be delisted from the regulated market
in Frankfurt after completion of the deal, though would still be
quoted on the open market to permit trading in euros.
Shares in TUI Travel closed up 3.5 percent at 405.04 pence,
while shares in TUI AG closed up 5.5 percent at 12.595 euros.
Joussen and Long will act as joint chief executives of the
merged group until February 2016, with Long to then become
chairman and Joussen to continue as CEO.
TUI Travel is being advised by Lazard, Bank of America
Merrill Lynch and Barclays, while Deutsche Bank and Greenhill
are advising TUI AG.
($1 = 0.7359 Euros)
($1 = 0.5880 British Pounds)
(Additional reporting by Peter Maushagen and Kate Holton;
Editing by Pravin Char and Sophie Walker)