£1.8bn Thomson deal creates a holiday giant

Concern about the effect on smaller firms as Preussag realises ambition of creating the biggest package operator in Europe

Britain's biggest holiday operator is expected to be sold to a German conglomerate after the directors of Thomson Travel agreed to recommend a takeover bid yesterday.

The £1.8bn offer from Preussag would create the largest holiday company in Europe. Last night industry experts said tourists would not be affected immediately by the deal. But they said prices could eventually rise as the biggest firms started to increasingly dominate the market and squeeze out smaller operators. "In the short term it would be wrong to think that suddenly holidaymakers are going to get cheaper or more expensive rooms and flights," said Jeremy Skidmore, editor of Travel Weekly.

"Long term there is more of an issue. Bigger companies are getting bigger across Europe. It's all about better deals that they can get on rooms and aviation fuel. Margins are tight and the bigger you are the better deals you can get."

The Association of Independent Tour Operators said it was concerned at the likely effect on smaller firms. John Bennett, the chairman, said there was "an ongoing concern about a number of issues" related to the strength of the big four operators. The expected deal comes after a period of frantic speculation within the package holiday market - a market that would be drastically altered if the deal goes through.

A takeover of Thomson had been expected for months, partly because its launch share price of £1.70 had slumped since its 1998 flotation. Original shareholders, who are given a 10 per cent discount on Thomson holidays, were told yesterday the perk would be maintained by the new owner.

The company was founded by the media tycoon Lord Thomson of Fleet in 1965 and now holds 24 per cent of the UK market, which made it attractive to Preussag's domestic rivals, C&N. That firm first offered £1.3bn, then £1.45bn, but both bids were rejected by the Thomson board. A third offer of £1.6bn, or £1.60 a share, brought the two sides back to the table this month.

The negotiations were hijacked by the bid from Preussag, which owns the holding stake in Thomas Cook, the third-placed company in the British holiday market behind Thomson and Airtours and ahead of First Choice.

Charles Gurassa, chief executive of Thomson Travel, said yesterday: "The board is unanimous in the view that this offer represents fair value for the business. Thomson's strong brands and market positions complement Preussag's own portfolio. It's a great fit."

Observers said the deal, which would require Preussag to sell its stake in Thomas Cook under monopoly legislation, marks a trend within the holiday industry towards cross-European expansion.

At the moment there are three main European markets for package holidays - Germany, Britain and Scandinavia. Preussag's purchase of the Thomson portfolio would give it control of the Scandinavian holiday firm Fritids Resor.

If the takeover succeeds, the thwarted C&N or the Swiss firm Kuoni may step in and buy Preussag's 50.1 per cent share in Thomas Cook. To complicate the position further, there are suggestions that Preussag may initially buy a further 22 per cent of Thomas Cook, giving it a total of more than 72 per cent, creating a more attractive prospect to a potential buyer.

Mr Skidmore said: "It's not a declining market. Practically everyone you know goes on holiday or wants to go on holiday. We get very emotive about the Germans but I don't think that people are going to be bothered by the fact that the company are German."

Preussag's chief executive, Michael Frenzel said: "The acquisition of Thomson Travel is an important step towards Preussag's goal."

Last night Susan Knorre, Preussag's spokeswoman, said the group was very similar to Thomson in terms of quality, hotels and destinations. She also said there were no fears than xenophobic Britons would be put off going on holiday with a German company. "People here are aware of the jokes," she said. "We understand the British humour more than you might think."

Start your day with The Independent, sign up for daily news emails
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
Life and Style
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own