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Travel firms mull new deals
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July 9, 1999: 11:05 a.m. ET
Collapse of First Choice-Kuoni paves way for new round of industry mergers
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LONDON (CNNfn) - Preussag, the German industrial company, emerged Friday as the front-runner to acquire Swiss travel planner Kuoni as analysts predicted more consolidation in the European vacation industry.
Preussag's interest follows the rejection Thursday by shareholders of Britain's First Choice travel company of a planned friendly merger with Kuoni.
"Kuoni has become a bid target for Preussag, though it would need to be an agreed deal," said Nigel Hicks, leisure analyst at Dresdner Kleinwort Benson in London. The Swiss company's closely-held share structure makes a hostile bid almost impossible.
Kuoni declined to comment on speculation about a deal, but its shares rose 6.6 percent at midday Friday on expectation of a move from the German firm. "Preussag has played it very cleverly. They have sealed a deal with Kuoni and lent their support to the First Choice merger in the hope that it didn't happen," said Wicks.
The German company has an existing agreement to take a stake in Kuoni's Swiss operation, but is targeting a friendly merger with the whole firm to continue its rapid transformation from an industrial holding firm into Europe's largest travel operator.
Preussag (FPRS) shares advanced 2.8 percent to 56.60 euros.
Preussag, which owns 10 percent of First Choice through its control of travel agent Thomas Cook, had initially supported a rival hostile bid for First Choice from Britain's second-largest travel firm, Airtours.
Airtours confirmed Thursday that it planned to revive its pursuit, calling on the First Choice board to drop opposition to a takeover and accelerating a bid to secure regulatory support for a deal.
First Choice (FCD) shares jumped 6.8 percent to 203 pence in morning trading in London on the expectation that Airtours will rebid if European Commission antitrust officials approve its plan. Airtours (AIR) shares advanced 1.4 percent to 530 pence.
Airtours' original 950 million-pound ($1.48 billion) stock bid for First Choice was 40 percent higher than the no-premium Kuoni merger plan. The offer lapsed last month after the commission launched a three-month investigation.
Wicks said a revised Airtours bid will hinge on the antitrust ruling. Airtours is believed to have offered to sell its in-house airline and provide protection for independent travel agents. However, commission officials are believed to be concentrating on the anti-competitive aspects of the proposed deal.
If Airtours is successful in acquiring First Choice, it will leapfrog Thomson Group as Britain's largest travel operator with a market share of about 35 percent. The three largest U.K. vacation planning companies would then have a combined market share approaching 70 percent. 
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