TUI Travel and German parent company TUI AG unveil merger proposals – with tax benefits

Date added: 28 June, 2014

TUI Travel and its German parent company, TUI AG look set to unite in a £5.6 billion merger that will create the world’s largest tourism business. Analysts have been speculating about a marriage of the two groups since 2007, when TUI Travel was created through the merger of Britain’s First Choice holidays and the tourism business of TUI AG. TUI AG, which owns 230 hotels, a cruise business and a stake in the Hapag-Lloyd shipping group, retained a 55% holding in the UK company following the 2007 tie-up. They have now reached agreement in principle on the merger. The expanded company will be headquartered in Germany but listed on the London Stock Exchange. The proposed deal will generate recurring cost savings of at least £36m per year through initiatives such as scrapping the UK headquarters (and losing jobs). There would be “certain cash tax benefits” from a long-awaited tie-up. Had the merger been in place in the 2012/13 tax year, it is estimated they would have saved £28m. TUI admitted in December 2013 that it had paid no UK corporation tax in recent years, despite vast profits.
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TUI Travel and German parent unveil merger proposals

British tour operator behind the Thomson and First Choice brands announces plans for a possible all-share nil-premium merger with TUI AG to create the world’s biggest tourism business

TUI AG bid for Tui Travel is on the cards, says Morgan Stanley

Analysts have long expected a marriage between TUI Travel of the UK and TUI AG, its German parent

By Nathalie Thomas, Leisure and Transport Correspondent (Telegraph)

27 Jun 2014

TUI Travel and its German parent company, TUI AG, finally look set to unite in a €7bn (£5.6bn) merger that will create the world’s largest tourism business.

Analysts have been speculating about a marriage of the two groups since 2007, when TUI Travel was created through the merger of Britain’s First Choice holidays and the tourism business of TUI AG.

TUI AG, which owns 230 hotels, a cruise business and a stake in the Hapag-Lloyd shipping group, retained a 55pc holding in the UK company following the 2007 tie-up.

After years of keeping the markets guessing, the two companies said in a joint statement on Friday that they have reached agreement in principle on the terms of a possible all-share nil-premium merger, which would create a global tourism business worth €7bn on a fully diluted basis.

The expanded company will be headquartered in Germany but listed on the London Stock Exchange. Peter Long, TUI’s chief executive, will job share with TUI AG’s head, Friedrich Joussen, until February 2016.

The proposed deal, which will generate recurring cost savings of at least €45m (£36m) a year through initiatives such as scrapping the UK headquarters, has already received support from TUI AG’s biggest shareholder, Russian steel tycoon Alexey Mordashov.

The companies said there would also be “certain cash tax benefits” from a long-awaited tie-up. Had the merger been in place in the 2012/13 tax year, it is estimated they would have saved £28m.

Mr Long would not go into the potential consequences for jobs in the UK, if the enlarged group’s headquarters are in Hanover, Germany. But he said: “Don’t make the assumption just because we say we have got a business domiciled in Germany and headquartered [there], that means all the head office is in one location.”

A previous attempt at a merger early last year failed after TUI Travel shareholders objected at potentially receiving shares in a German-listed company. For years, TUI Travel shareholders had also been anticipating a premium-priced takeover by the German company but they are expected to be appeased by the terms of the new deal, as TUI AG’s shares currently trade at a 20-25pc discount to what analysts believe is the real, collective value of the conglomerate’s different divisions.

Shares in TUI Travel closed up 13.5 at 403.5 following news of the potential deal. TUI Travel is being advised by Lazard, Bank of America Merrill Lynch and Barclays.

The companies insisted that discussions are ongoing and “there can be no certainty that an offer will be made”.

Sir Michael Hodgkinson, deputy chairman and senior independent director of TUI Travel said: “The merger would deliver significant value to shareholders. This is partly due to the simplification of the ownership structure, the operational synergies that we foresee and also the successful working relationship already established between TUI AG and TUI Travel.”

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/10930759/TUI-Travel-and-German-parent-unveil-merger-proposals.html

Earlier:

Tui Travel (owns Thomson and First Choice) paid no corporation tax in UK last year

4.12.2012Britain’s biggest travel company paid no UK corporation tax in its last financial year despite posting record annual profits on Tuesday. Tui said it had been a year of “many successes”, with an 8% leap in underlying pre-tax profits to £390m. But its UK corporation tax bill was zero as a result of losses incurred following a restructuring launched 5 years ago. It said it would start paying tax again once those losses have been carried forward and that it was paying the “right amount of corporation tax” in the countries in which it operates. Tui said it was “fully compliant with UK tax law”, and it expected to pay small amounts of UK corporation tax in 2013/14 with significantly larger amounts in later years as brought-forward losses were eliminated. It is galling that a company can both crow about financial successes, and yet avoid making the sort of tax payments that would therefore be expected. EasyJet also pays very little corporation tax. So much for the alleged huge financial contribution that aviation makes to the UK. The tax affairs of Google, Amazon and Starbucks have made many in the UK very angry indeed. https://www.airportwatch.org.uk/?p=1953

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