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News 21.02.13


More disposals ahead for ‘complex’ Cook?


Patrick Whyte


HARRIET GREEN is set to reveal her transformation plan for Thomas Cook on March 13,


with speculation mounting that it could include the sale of Neilson and Gold Medal. A spokesperson for Cook said:


“We are reviewing every part of our business as we aim to turn round Thomas Cook in the UK, and this involves considering many options.” It is believed the specialist ski division and long-haul business have been earmarked for potential sale as the operator continues its quest to reduce its debt pile. “Disposals have been on the cards


certainly since Harriet Green took over and even before,” said Douglas McNeill, investment director at Charles Stanley Securities.


WHAT’S BEEN ALREADY SOLD ■ A stake in Thomas Cook India to Canadian investor Fairbridge Capital for £94 million.


■ An office block in the Netherlands for £15 million to FN2, which is part of the Fotex Group.


■ Five hotels under the Hotels Y Clubs De Vacaciones brand to Iberostar for ¤20 million.


■ The Explorers Hotel, a three-star hotel near Disneyland Paris, France, for £2.9 million to Verquin.


■ Sale and leaseback of 17 aircraft in European operation in 2012 to raise £183 million. Sale and leaseback of six aircraft from UK fleet in 2011, followed by four more in 2012 bringing the UK fleet to 31.


04 21.02.2013


“This is going to be Harriet Green setting out her stall,” said McNeill. One area that could be set for


McNeil: in-house flying “not essential” “She seems to think that the group


is more complex than it needs to be.” Other assets that could be disposed of include a 6% stake in National Air Traffic Services, which Investec estimates could bring in £60 million. However, McNeill warned this could prove difficult because of a “complicated shareholder structure”. The announcement in March will include an update on the progress of its business transformation and its financial performance.


more change is the airline business. Last year Thomas Cook signed a deal to buy 80,000 trips with easyJet for the summer and at the start of this month it revealed it was merging three of its airline units. “There’s been some talk that it does not regard in-house flying as an essential part of the future,” said McNeill. “The easyJet deal was small but


could be seen as a straw in the wind.” Travel industry specialist Alan Bowen said: “People are interested in the parts of the business that have got unique selling points such as Neilson, and if these businesses are making money, the better chance there is of finding a buyer. “However, Cook needs to have enough left,” he warned. “It has to leave itself with a viable business.”


Club 18-30 i


Cook brands include:


■ Airtours ■ Club 18-30 ■ Cresta ■ Cruise Thomas Cook ■ Neilson ■ Gold Medal ■ Manos ■ Hotels4u.com ■ Escapades ■ Sentido Hotels


■ Style ■ Thomas Cook Signature ■ Elegant Resorts ■ Going Places ■ Direct Holidays ■ The Cruise Store ■ Thomas Cook Sport


Comment “Don’t expect Green to be in a hurry to sell off the stars in the portfolio”


THOMAS COOK’S disposals last year represented the “easy wins” for Green and her new team. However, this time around the decision will be far less straightforward. Selling operating divisions and subsidiaries will raise cash to pay down debt, but if those divisions are profitable then the group will be giving up the underlying earnings which service the debts.


The M&A market has been awash with speculation as to which assets might be plucked out by bidders. Elegant Resorts, Hotels4u.com and Gold Medal would all feature high on the wishlist of competitors and financial investors. But we don’t expect Green to be in a hurry to sell off the stars in the portfolio, which would leave the group without


Jones: Cook needs engines of growth


the engines of growth that it desperately depends on. Equally, disposing of other, more easily separable brands will not be easy. Neilson is an old school, asset- intensive operator competing in a new world. The brand has equity


and its customer proposition is sound, but it has been loss-making for years. It no longer owns many assets, and much of its product is exclusive. Given Cook’s competitors have


evolved to create more flexible, asset-light business models, it is difficult to see Neilson being acquired by a mainstream trade buyer. It is also difficult to see private equity investors getting excited about what is regarded as an outmoded business model. We have been impressed by the


progress Green and team have made, but it is a long road back and the going is about to get tougher.


Christopher Jones is co-head of the consumer sector at Livingstone Partners


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