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C&N Bids For Thomson Travel

A decent development in Europe’s tourism industry places the sector within the new globalization sphere where most of the world’s major industries now sit. Last month, C&N Touristik (Condor & Neckermann) made an official hostile takeover bid for the UK’s Thomson Travel Group. The initial bid, in the amount of £1.3 billion, was considered unacceptable, so C&N came back with a bid of 1.53 billion pounds sterling. International analysts expect the bid to be accepted. This ends longtime speculation of the German group’s interest for Thomson’s shares.

If the deal succeeds, dozens of holiday brands such as Britannia, Thomson Holidays, Crystal Holidays and Portland Direct will end up in foreign hands. It would also mean a domination of the British package holiday market by German-held companies, following TUI Group’s recent acquisition of the Thomas Cook Group.

But shareholders of the British group may not find the deal unsatisfactory. Thomson’s performance as a publicly-quoted company has been disappointing. Last year, shareholders experienced a collapse in the company’s share price because of low profits posted. For 1999, the company’s profits dropped from 124.4 million pounds posted in 1998 to 77 million pounds last year. Sales for the year reached 2.8 billion pounds. That compares with 3.0 billion posted by C&N.

With the increased bid by the German company, it is expected that Thomson shareholders will hardly think twice before getting rid of their undervalued shares. Crucial to the decision, however, will be the reaction of the Thomson family in Canada, which still owns a 20% of the shares, as well as of other UK institutional shareholders such as Prudential and Legal & General. C&N Touristik currently owns 2.9% of Thomson.

C&N’s chief executive commented that “the combination of the two groups can bring benefits to both customers and employees. We believe that our proposal will be welcomed by Thomson shareholders.”

Reaction at the City of London was mixed. At the initial offer price, the bid would have valued Thomson at £400 million less that it was worth at the time of flotation, but it still reflects a premium of 36.5% when compared to closing price of 95.5 pence when news of the deal was first published in newspapers. Thomson shares rose by 33.5 pence to 122.75 pence, while C&N’s offer to Thomson shareholders equals 130 pence per share all in cash.

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