Thomas Cook in play after Arcandor files for insolvency

Travel giant insists that holidaymakers will not be affected by parent's collapse
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The Independent Online

The ownership of Britain's best-known travel group was in doubt last night as its majority shareholder collapsed, although Thomas Cook moved quickly to reassure holidaymakers that it was "business as usual".

Arcandor, the debt-laden retail group which has a 52.8 per cent stake in the FTSE 100 travel business, filed for insolvency in Germany yesterday after the German Chancellor Angela Merkel refused a request for €650m (£560m) of state aid, leaving Arcandor unable to meet repayments on €710m of loans due this week.

The insolvency filing – which is similar to the Chapter 11 bankruptcy protection in the US – applies to Arcandor's Karstadt department stores, its mail-order business Primondo and the catalogue company Quelle, and puts 43,000 jobs at risk in Germany.

The insolvency filing does not include Thomas Cook, Europe's second-largest travel company, but Arcandor's stake in the business is understood to have been used as collateral for loans with its banks, which include Royal Bank of Scotland, Commerzbank and Bayern LB. Shares in Thomas Cook soared 10 per cent to 235.75p yesterday amid expectations the banks' sale of the stake could trigger a bid for the whole company.

Manny Fontenla-Novoa, the chief executive of Thomas Cook, stressed that Arcandor's collapse would not have any effect on its customers or suppliers. "We remain as a completely independent and separate business, ring-fenced from Arcandor. There is no impact whatsoever on our aircraft or our hotel relationships, nor on the holidays that we provide to our customers." A Thomas Cook spokeswoman added: "This is not another Excel situation," referring to the collapsed operator.

Market sources said a decision by the banks to sell the 52.8 per cent stake could be lengthy and complex, but three scenarios are likely to emerge. First, the banks could place the shares on the market or with institutional investors. Second, Arcandor's banks could in effect put Thomas Cook up for sale by seeking a buyer for the entire stake, which would give a purchaser majority control and trigger a bid for the whole company under Takeover Panel rules. Third, and least likely in the view of analysts, the banks could hold on to the stake until takeover conditions in the debt market improve.

The retail and tourism company Rewe, which is Germany's third-largest tour operator, has previously expressed an interest in acquiring Thomas Cook, but declined to comment yesterday.

However, Mr Fontenla-Novoa yesterday said Thomas Cook was not in any talks with potential suitors. "I can categorically say – on the record – I have had no approaches today from anyone," adding he was not working on any sort of management buyout. Despite recent robust trading statements, the Arcandor-situation has weighed on Thomas Cook's shares for several months.

Nick Batram, at KBC Peel Hunt, said: "Clearly, the market does not know where to place its bets, whether it's a placing at a big discount or a potential acquirer of the whole stake... Thomas Cook is a strong business and even at this level the [share] price is attractive and once the uncertainty is removed either way the shares would be expected to recover. It is not in anyone's interests for this situation to drag on."

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