The Hindu Business Line : Thomas Cook to acquire TCI

TAKEOVER MODE: Mr Udayan Bose (right), Chairman, Thomas Cook India, and Mr Madhavan Menon, Managing Director, at a press conference in Mumbai on Friday. -- Shashi Ashiwal

Mumbai , Dec. 1

Thomas Cook India on Friday said that it would acquire Travel Corporation (India) Pvt Ltd (TCI) for Rs 182.45 crore. In addition to acquiring TCI, Thomas Cook also plans to acquire TT Enterprises' visa services for Rs 16.9 crore. Both transactions will be all-cash deals and are subject to approval at the EGM of the company to be held on December 26.

The deals will be funded through a combination of internal accruals and debt.

The company's balance sheet would allow it to easily raise Rs 200 crore to Rs 300 crore, Mr Udayan Bose, Chairman, Thomas Cook, said.

According to Mr Bose, whatever debt is raised will be taken off the books in one year.

Thomas Cook shares rose by Rs 51.25 (10 per cent) to close at Rs 564.05 on the Bombay Stock Exchange.

At the current market price for Thomas Cook, a rupee of its turnover translates into a market value of Rs 5.17.

In contrast, TCI's business, at the acquisition price, translates into a valuation of 30 paise to a rupee of its turnover.

While TCI has a significant presence in the inbound tourism market, Thomas Cook does not.

That was the primary reason why Thomas Cook decided to buy the company according to Mr Bose. He also said that TCI's inbound tourism accounted for 48 per cent of its turnover.

In contrast, for Thomas Cook it was only 5 per cent.

Actual Integration

The deal also gives Thomas Cook access to TCI's 11 international offices.

They will serve as selling and distribution offices for the group. TCI's profit before tax for the 2005-06 fiscal was Rs 9 crore on a turnover of Rs 570 crore.

Thomas Cook expects TCI's profit before tax for 2006-07 to be Rs 13 crore

Post acquisition, TCI will become a wholly owned subsidiary of Thomas Cook and Mr Jehangir Katgara, Director, TCI, will remain on the board.

Both companies are still working on the details of the actual integration.

Thomas Cook's acquisition of TT Services — a visa outsourcing service provider in India, Sri Lanka, Nepal & and Philippines — allows the company to offer one-stop travel arrangements for its customers.

TT Services currently has nine offices in India.

Purchasing Power

A company which needs to be serious about outbound traffic should also be able to provide better visa services, indicated Mr Bose.

TT Enterprises is in the process of demerging its visa services from its cargo and forex businesses.

It is only after the demerger that Thomas Cook will take control. Mr Madhavan Menon, Managing Director of Thomas Cook, expects that to happen sometime in the first quarter of 2007.

The deal increases Thomas Cook's purchasing power (leverage) with airlines and hotels.

The combined traffic of the two entities also propels Thomas Cook to number one position in the inbound tourism market in India, said Mr Bose.