Co-op and Thomas Cook in merger

THE Co-operative Group and Thomas Cook have merged their travel shops and foreign exchange businesses to create the UK’s largest high street travel chain.

The deal, which should complete in December, will create a 1,200-shop chain with annual sales of £358m, based on last year’s figures, and a combined base of 4.3 million customers.

The merger is structured so that the Midlands Co-operative will join as a shareholder with board representation in due course, bringing in a further 103 shops.  A term sheet has been signed and final documents are expected to be executed shortly.

The new venture will be 70% owned by Thomas Cook and 30% by the Manchester-based Co-op.

The two companies say the deal, which is being transacted for no initial cash consideration, offers potential savings of £45m.

Thomas Cook said it would enable it to increase the in-house distribution of its package holidays while the deal will give the Co-op a stronger foothold in the travel sector. Thomas Cook’s Going Places shops will be rebranded Co-operative Travel.

The Thomas Cook and The Co-operative Travel’s retail businesses are expected to deliver operating profits of £12.4m and £100,000 for the twelve months to September 30, 2010 and January 1, 2011 respectively. The companies said the new entity should be cash positive throughout the year.

Peter Marks, the Co-op’s chief executive, said: “Through our new found scale we will secure a profitable and successful business together, which will be good for our people and our members. Our customers will also benefit as we work to ensure that the merger leads to enhanced value in the holidays that we offer. It also offers excellent opportunities for the further development of the Co-operative Travel brand both on the high street and other channels to market.

“This deal is in line with The Co-operative Group’s wider strategy to grow its business through merger and acquisition and when opportunities exist, to link with like-minded brands which share our values so as to improve our offer to our customer members through the additional scale benefits they can bring.”

Manny Fontenla-Novoa, Thomas Cook’s chief executive said: “Today’s announcement, together with our plans to cut costs and streamline the rest of our UK business, will put us in a much stronger position, should market conditions in the UK remain weak, and will build a firm foundation for the future. For our shareholders, this transaction will deliver synergies, be earnings accretive and unlock significant value for no initial cash consideration.”