updated 2/12/2007 2:45:13 PM ET 2007-02-12T19:45:13

Britain's MyTravel and Germany's Thomas Cook announced Monday that they will combine in a deal to create a more cost-competitive European-based travel company.

The new company will retain the Thomas Cook name, one of the oldest established brands in the travel industry, and KarstadtQuelle, the German retailer that owns Thomas Cook and a department store chain, will hold a 52 percent stake in the combined group.

MyTravel will hold 48 percent in the new Thomas Cook Group PLC, which will be based in London and listed on the London Stock Exchange, the companies said in a statement.

Thomas Middelhoff, CEO of KarstadtQuelle and chairman of Thomas Cook, will chair the combined company, and Michael Beckett, chairman of MyTravel, will be deputy chairman, the companies said.

"The merger of MyTravel and Thomas Cook is quite a feat. ... We're the second leading travel company in Europe right now. We're aspiring to be the No. 1," said Peter McHugh, chief executive of MyTravel.

The companies said the deal will yield savings of $146 million a year.

"In terms of the spread of job losses, the major focus of the synergies will be in the U.K.," Thomas Cook Chief Executive Manny Fontenla-Novoa told reporters on a conference call. "There'll be an impact in Germany, but it will be a very small impact."

There was no word on the potential number of job cuts.

David Pope of Brewin Dolphin Securities said the deal was prompted by stagnation in the industry.

"The reason for this whole deal is that the European short-haul tour operator market is in decline because of the competition from low-cost carriers," Pope said. "Why have two tour operators taking off to the same destination that are only half full when you can join together and fly one full plane?"

MyTravel shares rose 28.5 percent to close at $5.96 on the London Stock Exchange. Shares in KarstadtQuelle gained 4.5 percent to $35.64 in Frankfurt.

The Englishman Thomas Cook launched his travel business in 1841, selling one-day rail excursions from Leicester to a temperance meeting in Loughborough, central England. The company today offers vacations to more than a thousand destinations, operates 121 currency exchanges and a fleet of two dozen aircraft.

In the year ending Oct. 31, Thomas Cook AG earned $223 million on sales of $10.1 billion.

MyTravel, founded in 1972, has 15,000 employees and a fleet of 31 aircraft. Its 17 brands in the U.K. include Airtours, Going Places and Direct Holidays. In the year ending Oct. 31, MyTravel reported sales $5.45 billion and pretax profit of $85.8 million.

Essen-based KarstadtQuelle, formed from the merger of Karstadt and mail-order company Quelle, describes itself as Europe's largest department store and mail order group. The company has been engaged in a long-term restructuring drive, selling stores and cutting jobs amid lackluster consumer spending in Europe's biggest economy.

In December, KarstadtQuelle agreed to buy out Lufthansa AG, its 50-50 partner in Thomas Cook, for $1.05 billion.

The deal is subject to approval of MyTravel shareholders, competition clearances and completion of KarstadtQuelle's deal for Lufthansa's interest in Thomas Cook. The companies said they expect the deal to be complete in June.

Following the Thomas Cook-MyTravel announcement, First Choice Holidays PLC announced it had terminated talks with potential buyers of its mainstream package tour business. First Choice didn't identify potential buyers, but it was understood that both Thomas Cook and MyTravel had been interested.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Discussion comments


Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.83%
Cash Back Cards 17.80%
Rewards Cards 17.18%
Source: Bankrate.com