EU deals blow to Airtours' bid for First Choice

AIRTOURS' HOSTILE bid for rival holiday firm First Choice suffered a blow yesterday after Europe's competition chief gave a strong hint he wanted the deal to be investigated by Britain's competition authorities.

Karel Van Miert, the Competition Commissioner, said the bid, which would create the UK's biggest holiday company, was "likely" to be referred back the UK. "It might well be that there could be a demand to refer the case to the UK authorities," he said.

Under EU law, the Commission cannot refer back a take-over deal inquiry unless the member state puts in a request to be allowed to investigate.

It is understood that Mr Van Miert's statement was aimed at reassuring the UK Government that a request to takeover the investigation would not be blocked. The Government was humiliated during the takeover of London Electricity by Electricite de France after the Commission rejected its request to vet the pounds 1.9bn deal. The Commission said it would be logical for the inquiry to be carried out by the UK authorities as it would mainly affect British consumers.

The combined group would own 34 per cent of the package travel industry, just ahead of Thomson with 28 per cent, effectively creating a duopoly. But the official stressed Mr Van Miert was not implying a request from Britain had been received.

The Department of Trade & Industry has until 31 May to decide whether to ask for the issue to repatriated. "No decision has been taken on this case," said a spokesman. The Commission is expected to clear the deal on 3 June - rather than proceed with an in-depth probe - unless the UK puts in a bid.

Airtours launched a hostile pounds 852m bid for First Choice in April, just a month after its target had agreed a pounds 1.4bn merger with Kuoni of Switzerland. It has won support from investors holding 51 per cent of First Choice, including the stakes held by Thomas Cook and WestLB.

Only a referral by the UK's Office of Fair Trading to the Monopolies and Mergers Commission, now known as the Competition Commission, could save the Kuoni deal, which has been approved by Brussels.

A spokesman for First Choice said: "This confirms that there is a great deal of uncertainty around the Airtours proposals and our advice is that shareholders should do nothing until the situation becomes clearer."

Airtours said it was confident the UK Government would not ask for the issue to be remitted back for an OFT inquiry.