Britain's Thomson Travel Group is facing a potential bid battle after a raid on its shares by Preussag, the German travel firm that owns Thomas Cook in the UK. The move came as Thomson started talks with C&N Touristic, a rival German holiday company, on an agreed 160p per share deal valuing Thomson at £1.6bn.
Preussag did not confirm that it was buying Thomson shares in the market, although the stock was being acquired by Goldman Sachs, which acts for the German group.
It was unclear how much of the equity Preussag had picked up, though volume in Thomson shares reached 137.4 million, equivalent to 13.7 per cent of Thomson's equity. Thomson shares closed 19.25p higher at 162.25p, although trades were struck as high as 166p. The shares are now only a few pence below the 170p issue price when Thomson came to the market two years ago.
Thomson confirmed it had received a further approach in addition to C&N's, but declined to identify the potential bidder. "The board has been contacted by another party who may or may not make an offer for the company at a price which has not yet been specified," the company said.
If Preussag does bid for Thomson it would have to sell its 51 per cent stake in Thomas Cook or face an almost certain block on competition grounds. Thomson, which owns the Lunn Poly chain, is Britain's largest package holiday company, with a market share of about 25 per cent, followed by Airtours with 20 per cent. Thomas Cook is ranked third with 18 per cent and a market value of between £800m and £900m.
Analysts pointed out that Airtours' bid for First Choice was blocked by the European Commission last year and that a Thomson-Thomas Cook link-would be more anti-competitive. But they said Preussag might be prepared to sell Thomas Cook in order to acquire Thomson and prevent its German rival from overtaking it as Europe' largest travel company.
Preussag has been prepared to sit on the sidelines as C&N stalked Thomson. C&N has had two approaches rejected by Thomson, but with talks starting on a possible agreed deal, Preussag may have felt compelled to intervene.
Jeremy Skidmore, editor of Travel Weekly, said Preussag had several options. "It could try to acquire Thomson and sell Thomas Cook. It could attempt to build a blocking stake to prevent C&N from succeeding. Or this could just be a spoiling tactic to push C&N into paying a higher price," he said
Institutional investors welcomed the news. One said: "It is always nice when an auction develops. We are looking forward to next week."
One analyst said Thomson's advisers would love to secure a deal at 170p per share. "Then they could say to shareholders: 'OK, it hasn't been a very good investment, but you've got your money back and had a cheap holiday' [from Thomson's Founders Club offer to its 500,000 founder shareholders]."
Industry experts said that if Preussag does successfully bid for Thomson, C&N could seek a merger deal with Airtours. That deal would face no competition problems in either the UK or Germany, but would create a powerful European force.
Analysts say C&N needs a deal as its two shareholders, Lufthansa and Karstadt, want to float the business next year. To do this it needs to extend its scope beyond Germany where its Condor Neckermann travel brand is a major player.
It is thought Preussag has more financial muscle for a bid battle than C&N. Preussag is publicly quoted in Germany and has the backing of investors to move further from its metal-bashing roots.
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