TUI TRAVEL shareholders stand to gain around £320m from the proposed £4.5bn merger with its German majority owner Tui AG, a leading leisure analyst has said.
Morgan Stanley analyst Jamie Rollo said in a note yesterday that although deal was a nil-premium merger, Tui shareholders will be earning a premium 48p per share because of Tui AG “significantly undervalued” share price.
Investors have long expected a tie-up between Tui Travel and its Germany parent company, which controls 55 per cent. The two firms last held merger talks back in 2013 but a deal collapsed after Tui AG said an offer would not make sense given their share prices at the time.
Since then, shares in Tui AG have risen 65 per cent while Tui Travel’s shares are up 44 per cent.
They said a deal would result in potential cost savings of at least £36m a year as they cut overlapping functions.
In his note, Rollo also estimated that the disposal of some non-core businesses could pave the way for a £1bn cash return for shareholders “at some point”.
However he said the deal was “strategically questionable”for Tui Travel as it would be merging with a weaker business.