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Friday, 12 May, 2000, 11:35 GMT 12:35 UK
Thomson in takeover battle

Thomson has 24% of the UK holiday market
The UK's biggest holiday company, Thomson Travel, is the subject of a takeover battle between two big German tour operators.

Thomson finally agreed to takeover talks with its German rival, C&N Touristic, after the company increased it offer.

But now it has received increased an unsolicited offer from another German company, believed to be Preussag, owners of the third largest UK travel group, Thomas Cook.

In a brief statement, Thomson said the talks "may or may not lead to a recommended cash offer for Thomson Travel at 160 pence per share."

The takeover deal would value Thomson at 1.6bn.

Either deal would give German companies a huge stake in the UK.

Thomas Cook already has 22% of the UK market, and some brands might have to be sold if the Preussag bid is successful.

Preussag is an engineering company that has moved into the service sector. It owns Hapag Touristik Union, one of the biggest tour operators in Germany.

Thomson owns a string of brands in the UK market, including Portland Direct, Crystal Holidays and the Magic Group.

It also owns a travel agent, Lunn Poly, and its own airline, Britannia.

But it has been struggling to keep up with rival Airtours, who has threatened to overtake it in the package holiday market.

Previous advances rejected

Thomson had previously rejected a series of offers from C&N, which is owned by Lufthansa, the airline, and retail and holiday group Karstadt Quelle.

In April C&N offered 130p a share, which was later increased to 145p.

A 145p offer would have valued the company at about 1.52bn.

In an earlier statement, Thomson had said: "The board, which has been so advised by Dresdner Kleinwort Benson, has concluded that an offer of 145p, if made, would not reflect the value of the business and its prospects."

Thomson based its rejection on the fact that it expected annualised cost savings to reach 50m in the period to 2002, and on the anticipated benefits of its investment in interactive technologies.

It also said it planned to improve its margins to make it the "best in class".

Troubles at Thomson

Since Thomson floated two years ago, it has had a difficult time.

The business was hit by a lack of last-minute summer bookings in 1999 and a quieter millennium period than expected, leading to a number of profits warnings and the resignation of chief executive Paul Brett.

Some analysts believe it has devoted too much time to vying for supremacy in the package holiday sector.

C&N is keen to gain a strong base in the UK market, where it currently has no presence.

Thomson was founded by Canadian media tycoon Lord Thomson in 1965, and was the first major package holiday company in the UK.

C&N was formed in 1998 by the merger of Lufthansa's Condor Flugdienst charter airline with NUR Touristic, the tour operator owned by Karstadt.

Thomson shares were up more than 10%, or 19p, to 162p on the London stock market.

Dealers said investment house Goldman Sachs was buying shares on behalf of Preussag.

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See also:

10 Sep 99 | The Company File
Thomson holidays slump
05 Apr 00 | Business
Thomson: We won't throw in towel
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