Thomson Travel rejects £1.3bn approach from German rival

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The Independent Online

Thomson Travel, Britain's biggest package holiday company, was facing a battle for its independence yesterday after C&N Touristic, a German rival, launched a £1.3bn bid for the company.

Thomson Travel, Britain's biggest package holiday company, was facing a battle for its independence yesterday after C&N Touristic, a German rival, launched a £1.3bn bid for the company.

C&N Touristic, Germany's second-biggest holiday group, made an indicative cash offer for Thomson of 130p per share. The approach represents a 36.5 per cent premium to the previous closing price but is still well below the 170p issue price when Thomson came to the market two years ago.

Thomson, which has been a stock market disaster since flotation, rejected the approach as "wholly inadequate". The shares soared 36 per cent to 129.5p.

The deal would put together C&N's powerful position in Germany with Thomson's leading position in the UK, where it controls 25 per cent of the package holiday market. It would combine C&N's Neckermann travel agency and Condor charter airline with Thomson's portfolio of businesses that includes the Britannia airline, Lunn Poly travel agencies and a series of holiday brands such as Crystal Holidays and Portland Direct.

Analysts described the bid as "opportunistic" but said the German group could secure an agreed deal if its offer was increased to 140p-150p per share.

"C&N have been the obvious buyer," one analyst said. "They are number two in Germany but don't have much elsewhere."

One of Thomson's major institutional shareholders described the offer as "a sighting shot". Another senior fund manager said: "It is a well-timed, opportunistic bid. But Thomson is a very powerful brand name. It's not on its knees."

Analysts said they were not expecting rival bids, though US cruise companies such as Royal Caribbean could be interested. UK rivals such as Airtours would be barred on competition grounds. Kuoni, the upmarket Swiss holiday firm whose merger with First Choice failed last year, is considered unlikely to join an auction process.

C&N is jointly owned by Lufthansa, the German airline, and Karstadt Quelle, one of Germany's biggest retailers. The group recorded sales of £2.8bn last year.

Stefan Pilcher, C&N's chief executive, yesterday criticised Thomson's recent performance, which has been characterised by a series of profits warnings and bungled strategy announcements. The business is "in a vulnerable position", he said.

C&N bought a further 19 million Thomson shares at 130p yesterday, taking its holding to 4.8 per cent. Its bid would mark another attempt to create major groupings in Europe's rapidly consolidating travel industry. With Thomson, C&N would overtake Preussag, the German group that controls a major stake in Thomas Cook, as Europe's biggest travel business. "There will be three big European players at the end of this - C&N, Preussag and Airtours," one analyst said.

Thomson's float in the summer of 1998 was hugely popular with private investors with the offer five-times over-subscribed. But the company has performed poorly in the public arena with three profits warnings in five months last year. Investor confidence collapsed a year ago when the company responded to Airtours' bid for First Choice with a threat to flood the market with cheap holidays to maintain its market leading position.

The fiasco led to a boardroom clear-out before the appointment of a former BA director, Charles Gurassa, as chief executive in December. The shares fell to 69p in February before Mr Gurassa outlined a three-year recovery plan. He pledged to cut annual costs, double operating margins and invest £100m in new systems and e-commerce initiatives. Earlier this month Thomson reported a halving of profits to £63.2m with a £12m charge from poor Millennium holiday sales.

The Canadian Thomson family that founded the group in 1965, is still the largest shareholder with 19.2 per cent.

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