© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: October 8, 2010 6:01 pm
Thomas Cook and The Co-operative Group have joined forces to create the market leader in high street travel shops with a non-cash merger.
Thomas Cook will own 70 per cent of the combined entity and the Co-op the remaining 30 per cent.
In addition to the UK’s biggest retail travel operation, the deal creates the biggest high street foreign exchange business, after the Post Office.
“This was possibly the last consolidation opportunity in this sector,” Manny Fontenla-Novoa, Thomas Cook chief executive, said of the retail shops.
Peter Marks, the Co-op’s chief executive, said the deal applied a lesson that the group had learnt in food and banking: “Scale is important and that is why this deal makes sense and is in the best interest of shareholders.”
The combined group will consist of 1,200 retail outlets, retaining a mix of both names – although 70 Thomas Cook “Going Places” shops will be rebranded as Co-operative Travel venues.
The companies expect a third partner, the Midlands Co-operative – with a 3.5 per cent stake – to join, which will add 103 shops to the venture. That will cut Thomas Cook’s shareholding to 66.5 per cent.
The merger will include the Co-op’s 345-person home-working network, corporate travel business, web and call-centre operations and franchise.
ThomasCook.com will remain a separate entity, as will Thomas Cook’s tour operating division. Both companies’ retail travel estates, foreign exchange and cruise operations are included in the merger.
Thomas Cook expects the proportion of its products sold in-house to rise from 69 per cent to 80 per cent.
Before job cuts – not yet quantified – the merged group will employ 9,000 people.
The companies said the deal would achieve synergies of at least £35m a year from the merged operations, derived from shared IT, a combined headquarters – likely to be in Peterborough – the streamlining of supplier contracts, job cuts and some shop closures.
Thomas Cook expects to glean a further £10m in “upstream” synergies operations. The deal will not affect job cuts announced last month, said Mr Fontenla-Novoa. On Friday, he said those cuts would number 400 this year, 100 of which were management positions. While “it is intended that the merger remains in the existence in the long term”, according to the companies’ announcement on Friday.
The Co-op can sell its shares to Thomas Cook after five years, for four times earnings before interest, tax, depreciation and amortisation. Thomas Cook has the option to call those shares for five times ebitda.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in