Thomas Cook to buy back Indian arm

Plans to expand in emerging markets where travel is growing fast.

Two years after it sold its Indian unit, Thomas Cook Group Plc, Europe's second-biggest travel company, will now buy it back from Dubai Financial.

Thomas Cook Plc will buy a 54.90 per cent stake in Thomas Cook India Ltd (TCIL) from Dubai Financial for around Rs 950 crore, and a further holding of as much as 20 per cent in an open offer at a price of Rs 107 a share, which is a 22 per cent premium to the scrip's Friday closing price of Rs 88. The open offer is expected by May-June.

As a result of this transaction Thomas Cook will acquire between 61.80 per cent and 74.90 per cent of TCIL's share capital, the price of which will range from Rs 1,061 crore to Rs 1,312 crore, giving Thomas Cook control of the company.

The deal values Thomas Cook India, which has about 180 travel stores in 40 cities, at around Rs 1,725 crore.

Thomas Cook can boost the Indian division's sales more quickly than Dubai Financial because it can offer local travellers a wider variety of European destinations, Chief Executive Officer Manny Fontenla-Novoa said on a conference call with journalists. "The acquisition fully supports our strategy," he said.

Share profit
Thomas Cook Plc had sold the stake to Dubai Financial as its two major shareholders "� German airline Lufthansa and Karstadt "� pulled out in 2006.

Dubai Financial had bought the shares at Rs 46 a share, and therefore made an estimated profit of Rs 61 a share aggregating to Rs 538 crore.

Thomas Cook India has two businesses in India: travel and foreign exchange. The company had bought Travel Corporation India, the Mumbai-based travel company and LKP Forex, a foreign exchange company, in 2006, for a combined deal size of Rs 450 crore.

The travel market is expanding by 15 per cent a year in India, according to Thomas Cook, also the country's second-largest tour operator.

Growth rates for travel in Asia, West Asia and Africa are more than twice as strong as in Europe and the Americas, the World Travel & Tourism Council said yesterday.

The company said it will also buy Thomas Cook branded businesses in Egypt and licences for the Thomas Cook brand in 15 West Asian countries. Fontenla-Novoa said the deals meant the company would own all Thomas Cook-branded businesses around the world.

Brand comfort
A Thomas Cook Group spokesperson from London told Business Standard, "It is too early to talk about restructuring as the document has not been inked properly as yet. The chances of a major restructuring are small. But the group will bring in management expertise, contents and relationships in hotels and some systems along with important operational efficiencies."

Udayan Bose, chairman, TCIL, said, "There will be no management changes as we have given good results. There would be some board changes as the three nominees of Dubai Financial will have to resign."

Bose also said that being with the parent company will also give the Indian outfit certain comfort as the brand licence was valid till 2012.

Emerging markets
Thomas Cook Plc, Europe's second-biggest travel firm, created last year from the tie-up of German group Arcandor's travel unit and Britain's MyTravel, said it was also on the lookout for more deals, particularly in Russia and China.

"We've identified India, Russia and China, probably in that order," Fontenla-Novoa said.

"We want to establish (ourselves) in the emerging markets because they are the growing market. The exciting thing about India is that the natural growth there is 15 per cent ... and we have a good management team there."

With reference to Russia, he said Thomas Cook was interested in tour and retail operators that service healthy demand there for sun and beach holidays, but did not name specific targets.