MyTravel sells loss-making German travel business
Thursday 02 October 2003
MyTravel yesterday admitted defeat in its attempts to crack Europe's biggest holiday market after it agreed to sell its loss-making German travel business for next to nothing.
The troubled tour operator will take an £85m hit on the disposal, which was welcomed by analysts. It is also selling its Polish operations, which will cost it a further £1m in exceptional charges.
The company's decision to turn its back on Germany ends a five-year association that prompted two profit warnings and severely dented its reputation with the City.
MyTravel's founder and former chairman David Crossland took full control of Frosch Touristik (FTi) in 2000, shortly after European regulators blocked his attempted takeover of First Choice. The German company, which last year racked up £31.2m of operating losses on sales of £422.6m, was Mr Crossland's consolation prize for watching Preussag and C&N carry off his UK rivals Thomson and Thomas Cook. But instead of rescuing MyTravel's fortunes, FTi dragged the company, formerly known as Airtours, down.
MyTravel, which has been pushed to the brink by accounting irregularities and a tough travel market, said it was selling FTi because "in view of its record and the difficult trading environment" it was more likely to hinder than help the group's eventual turnaround.
FTi, which also operates in Austria and Switzerland, was bought by a privately owned Germany company for "a nominal sum". MyTravel has had to write off £85m of goodwill and loans to recapitalise the German group because of the deal.
Its Polish businesses, Ving and Itaka, were taken off MyTravel's hands by a management buyout team. "There was no material cash consideration for the sale," MyTravel said.
Analysts at ABN Amro said it was "clearly appropriate" for the company to stem its losses in Germany and Poland by making the disposals, and instead "focus on turning around its core operations in the UK and Scandinavia".
The group is also in talks to sell most of its US operations, which, it is estimated, could raise about £180m. Thanks to an agreement reached with its banks earlier this week, MyTravel will be able to keep any money raised from disposals to use as working capital, rather than use the cash to pay down its £1.3bn debt mountain. In return for waiving immediate debt repayments, the company has promised to pay its bankers potentially hefty financing fees that are pegged to any rise in its share price.
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