The imminent sell-off of the last major part of the Swiss holiday giant Kuoni has left German competitor TUI rubbing its hands at the prospect of profitably divesting part of its business on the back of the deal.
Kuoni, which sold its core travel agency business to Cologne-based supermarket chain REWE in September, has now put its hotel bed agency Global Travel Distribution on the market.
A statement from the 110-year-old travel agent revealed it was in the early stages of discussions with several interested buyers. A day before the announcement, Bloomberg had already named Swedish private equity firm EQT Partners as the most promising candidate. EQT wouldn’t comment, but Kuoni's share price briefly gained 6 percent on the news.
If the deal goes ahead as expected, it's likely the same buyer will soon be knocking at TUI's door. A few days ago Friedrich Joussen, the head of the Hanover-based group, put its subsidiary Hotelbeds on the list of items which could be up for sale. The €4.3 billion ($4.62 billion) turnover company offers exactly the same services as Kuoni’s GTD: Accommodation capacity to Internet hotel-booking portals, travel agencies and tour operators.
In addition, both companies offer visa services and group travel for business customers. One could say the two companies go together like palm trees and pina coladas. Mr Joussen hopes that will be attractive to potential buyers.
Mr. Joussen regards Hotelbeds with its 6 percent market share as too small, despite having big customers such as Booking.com and HRS.
On top of that, TUI has always been top of the heap in this line of business, while Kuoni has occupied the global number two spot. Nevertheless, Mr. Joussen regards Hotelbeds with its 6 percent market share as too small, despite having big customers such as Booking.com and HRS. He said recently he sees a consolidation of the marketplace as inevitable.
Mr. Joussen, who's been at the helm of TUI for about a year now, would rather sink more money into cruise ships and hotels and let someone else take on the role of middleman for hotel beds. The necessary capital could now come from a financial investor such as EQT.
The Swedes will have to reach deep into their pockets to carry it off. Zurich Cantonal Bank estimates GTD to be worth €650 million. Analysts from Morgan Stanley reckon Hotelbeds could muster a sale price of €750 million.
EQT could still secure a bargain. Bed banks, as the industry calls these wholesalers, are among the fastest growing travel providers. Originally conceived as marketers of purchased hotel overcapacity, they are increasingly becoming a popular supplier for Internet accommodation portals. They also bundle beds available at short notice with flights and sell them on as charter trips.
The travel boom in the last year has seen Hotelbeds grow by 20 percent with EBITA profits of €117 million. Kuoni's bed bank business also grew by more than 10 percent last year.
Mr. Joussen is being tightlipped about whether he's been in discussion with potential GTD buyer EQT. He said he simply told the investment banks Merrill Lynch and Deutsche Bank, which are examining the potential sale of Hotelbeds, that there were many “well-known private equity firms interested.”
Off the record, managers in Hanover are talking about “good news from Switzerland.”
Analysts, too, believe a merger between GTD and Hotelbeds is likely, under the ownership of a financial investor. Jean-Philippe Bertschy of Swiss bank Vontobel says he thinks it would be “a sensible move.”
For Kuoni, this would mean the final destruction of the company which once ranked with Swissair as a national business icon. Perhaps the most painful milestone for the veteran firm is that in 2004 it let a golden opportunity slip through its fingers. The firm ruled out paying $135 million (€126 million) to takeover Booking.com, and Priceline acquired it instead. Today, U.S.-based Priceline has a market capitalization of $66 billion.
Holger Alich is Handelblatt's Switzerland correspondent, covering the financial industry. Christoph Schlautmann covers the logistics and waste management sectors for Handelsblatt. To contact the authors: [email protected], [email protected]