TUI Travel Plc, Europe’s largest tour operator, jumped to the highest since April 2010 after it received an approach from its German majority owner to merge the companies.
Talks with TUI AG are “at a very early stage” and “may or may not result in a combination of the two companies,” Crawley, England-based TUI Travel said in a statement today.
TUI Travel jumped as much as 8.4 percent and closed up 3.9 percent at 292.5 pence in London, valuing the company at 3.3 billion pounds ($5.2 billion). TUI AG had a 57.5 percent interest in TUI Travel, equivalent to 51.7 percent on a diluted basis, according to a Dec. 6 statement.
TUI AG Chief Executive Officer Michael Frenzel, who is stepping down in February, has sought to focus the company on tourism by putting units such as shipping up for sale.
“It is obvious that you can harvest synergies if you streamline the company’s structure,” Jochen Rothenbacher, a Frankfurt-based analyst at Equinet Bank AG, said by phone. “The deal’s structure is unclear at the moment. It should be favorable to both TUI AG’s and TUI Travel’s shareholders.”
TUI AG shares also jumped in Germany, with the stock soaring as much as 10 percent to a five-week high in Frankfurt.
TUI Travel denied that any combination would be achieved by a reverse takeover, as reported by Reuters, and said it would be completed through a “nil premium all-share merger.” TUI AG will have to submit a firm intention to make an offer by Feb. 13, the owner of the Thomson holiday brand said.
TUI AG’s annual general meeting on Feb. 13 is “a good point in time” to ask shareholders “to vote for any kind of deal’s structure,” Rothenbacher said.
TUI Travel was formed in 2007 when TUI combined its travel unit with First Choice Holidays Plc to ward off competition from Web travel agents and budget airlines.
Editors: Kim McLaughlin and Paul Jarvis.