View from City Road: Cook fails to convince

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HOWARD KLEIN, chairman of Owners Abroad, once told a leisure industry audience that British holidaymakers like pounds 1.10p of value for every pounds 1 they spend. Thomas Cook must have been present, and listening. Its tender proposal for Owners' shares suggests it wants pounds 233m of value for a pounds 29m outlay.

While Christopher Rodrigues, chief executive of Cook, yesterday argued convincingly for the commercial benefits of an alliance with Owners, he failed to surmount the financial hurdle erected by Airtours.

He also failed to convince the cynics that the tender move was not a spoiling tactic. While the tender itself may not be, the condition tied to it - that the Airtours offer must lapse before it takes effect - almost certainly is.

If Cook wants to cement an alliance with Owners by taking a stake, then it should pitch for the shares in the market and not rely on the half-baked tender mechanism that UK shareholders do not like. Look no further that the recent shenanigans of Hongkong Land's tender for Trafalgar House.

So why has Cook taken this route? It could buy shares in the market, which would not transgress takeover rules. And it certainly has the financial muscle, courtesy of West LB, its rich German parent.

Cook's move, though, is just one option in what is becoming a very complicated scenario. By not raiding the market, Cook has avoided some nasty complications should Airtours' bid win majority control.

For instance, if it netted more than 10 per cent in a market raid it could well end up as a minority holder of Owners, which would be a subsidiary of Airtours, a powerful company that it would need to do business with.

In one sense, Cook appears to have hedged its bets by appeasing Owners' board and leaving the door open to do commercial deals with Airtours. Cook, after all, could have mounted a full cash bid. Its argument of wanting to spread its capital on as many investments as possible looks weak against the case for buying a cash-positive and recovering company like Owners.

Airtours' terms value Owners shares at 144p each. Cook's proposal offers a short- term ceiling of 150p. The choice is simple: 'Don't just book it - go with Airtours.'