* Year underlying EBITA 746 mln euros, vs forecast 681 mln
* Says will not pay dividend for 2011/12
* Net debt down 639 mln euros to 178 mln
* Shares rise 4 percent
FRANKFURT, Dec 19 (Reuters) - German travel and tourism group TUI AG said a merger of Hapag-Lloyd with a rival would increase the value of its investment in the container shipper, as it looks for a good time to exit the industry.
Along with a 56 percent stake in world's largest tour operator TUI Travel, TUI AG also owns 22 percent of Hapag-Lloyd, which said on Tuesday it was in merger talks with rival Hamburg Sued.
TUI has long been wanting to exit Hapag-Lloyd to focus fully on tourism and has the option to either sell its stake to a third party or call for a flotation, which depends on the stock market picking up.
"A merger would be positive because it would increase the value of both companies and so the value of our investment would rise," Chief Executive Michael Frenzel said on Wednesday after TUI AG reported a better-than-expected 24 percent rise in annual profit.
He said a deal would create the world's fourth-largest shipping company in a sector where size is important and bring benefits through the combination of operations and economies of scale.
"These talks do not change our decision to exit the industry," he added.
Shares in TUI AG, which has cut its stake in Hapag-Lloyd to 22 percent from 38.4 percent this year, were up 4.06 percent at 8.15 euros at 1233 GMT, the second highest mid-cap riser in Germany.
Selling part of its stake in Hapag-Lloyd enabled TUI AG to reduce its net debt by 78 percent over the course of the year to 178 million euros ($235.2 million) as at end-September.
Despite this, and an improvement in profits as TUI Travel grabbed market share in the UK and TUI AG's own hotels business pushed through higher prices, Frenzel said TUI would not be paying a dividend for the year to end Sept 2012.
"We have an excellent operating performance, but on the net EPS side we're still negative," he said, adding the group would prefer to concentrate on consolidating its finances so that it could take advantage of any strategic opportunities that may arise in the tourism sector.
TUI has long been expected by analysts to buy out the minority stake in TUI Travel. When asked if there were such plans, Frenzel said he would not "speculate" on any strategic options.
For the year to end-September, TUI said underlying earnings before interest, tax and amortisation (EBITA) reached a record 745.7 million euros, beating expectations in a Reuters poll for 681 million euros. Turnover matched expectations at 18.3 billion.
On a net basis, TUI posted a loss per share of 0.16 euros, compared with a loss of 0.01 euros last year, hurt by its stake in loss-making Hapag-Lloyd, which wiped 49 million euros off its group profits.
Frenzel, who will hand over the CEO reins to Friedrich Joussen in February, said bookings had been good throughout October, November and December.
"The economic environment is still tough, but people still want to go on holiday, judging by our results and trading at the start of our new financial year," he said.
TUI Travel had published results on Dec 4.