Business Weekly - Cambridge, UK

The Germany-based KarstadtQuelle’s decision to merge Thomas Cook with MyTravel followed on swiftly from its announcement that it was acquiring Lufthansa’s 50 per cent stake in Thomas Cook.

The Essen-based firm calculates that the annualised pre-tax cost benefits arising from the deal will be at least £75m per annum once the full benefits of the merger are realised.

The enlarged group will trade as Thomas Cook Group plc, will have a listing on the London Stock Exchange and global headquarters in London.

It will be 52 per cent owned by KarstadtQuelle and 48 per cent owned by the shareholders of MyTravel.

The deal is expected to be completed by June. It is conditional on the approval of MyTravel shareholders, competition clearances and completion of the Thomas Cook transaction between KarstadtQuelle and Lufthansa.

As well as the substantial cost savings the group expects to make, primarily from the UK, the new business holds a strong belief in the future of package holidays.

Manny Fontenla-Novoa, CEO of Thomas Cook AG and joint CEO of the new group, said: “We believe in the future of the mainstream package holiday market, which will continue to be a core product of our ongoing business strategy.

“An immediate priority of the group will be to grow the independent travel, online and financial services segment of the business, where we see significant growth opportunities.”

The combined turnover of Thomas Cook and MyTravel for 2006 was £7.95 billion with an EBITDA of £343m. With almost 3,000 agencies and over 32,000 employees between them in the UK alone, there is plenty of scope for corporate rationalisation.

As a listed company, there will be greater transparency in market valuation and substantial synergies, which will positively impact the KarstadtQuelle income statement.

Furthermore, the new company will directly benefit from the MyTravel tax loss carried forward of approximately £800m. KarstadtQuelle remains free of financial debt, taking into account the ongoing real estate transaction.

Over an interim period, Fontenla-Novoa will manage Thomas Cook Group together with the current CEO of MyTravel, Peter McHugh, who will retire at the end of 2007.

The CFO of the new company will be Ludger Heuberg, who is currently the finance director of Thomas Cook AG.