Germany's TUI and UK-based TUI Travel will reap more benefits than they expected from an all-share merger and build more hotels than previously predicted, the companies said yesterday as their boards asked investors to bless the merger.
TUI Travel is a British tour operator behind the Thomson and First Choice brands.
The merger will create the world's biggest tourism business
The combined entity, valued at about €6.5bn, will realise €100m via tax savings and the elimination of overlapping functions and separate stock exchange listings, compared to €80m projected previously, TUI Travel said in a statement.
Adding more hotels and boosting occupancy rates will further increase earnings, TUI chief executive Friedrich Joussen said.
The deal would remove the biggest obstacle in TUI 's corporate structure 18 months after Mr Joussen took the helm.
The executive, who restored the ability to pay dividends after investors came away empty-handed for years, plans to create the world's largest tourism business and run it with TUI Travel boss Peter Long until taking sole leadership in 2016.
"The main purpose of this merger is future-proofing the business," Mr Joussen said. "Cost synergies are very certain."
The new company will be listed on the London Stock Exchange, with a secondary quotation in Germany, the companies said.
TUI intends to add 60 hotels by fiscal year 2019, adding to the 232 lodgings it has today.
That's up from an earlier forecast for 30 new openings. New hotels have contributed about €1.4m each to operating profit, the company said. The merger will also allow TUI to add more cruise ships, it said.