Industry

Thomas Cook (India) grows through acquisitions

Madhavan Menon

Madhavan Menon  

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With seven acquisitions in nine years, travel and travel related financial services firm Thomas Cook (India) Ltd. (TCIL) is going strong, especially after Pream Wasta-led Canadian investment firm Fairfax Financial Holdings acquired majority control from the U.K.’s Thomas Cook Group in 2012.

Continuing the acquisition spree (five in three years) TCIL on Friday signed a definitive agreement with Swiss firm Kuoni Group to acquire Kuoni’s travel businesses across India and Hong Kong (HK) in entirety for Rs.535 crore.

In January this year, Kuoni had decided to exit tour operating business globally including India and these two deals are in line with that.

The inorganic growth through acquisitions started in 2006 when TCIL acquired LKP Forex Ltd. to grow its foreign exchange business. In the following year, it acquired Travel Corporation (India) Ltd. In 2013, TCIL bought out Ikya Human Capital Solutions, which has been as renamed Quess Corp.

In 2014, Sterling Holidays was acquired while in 2015, the company took over Luxe Asia Pvt Ltd, a destination management company based in Sri Lanka and now Kuoni’s two businesses in India and HK. In India, TCIL will acquire Kuoni’s outbound and inbound businesses for Rs.320 crore while in HK, it will acquire the Swiss firm’s outbound business for Rs.215 crore.

“We expect the transaction to close in the third quarter of this year following grant of regulatory approvals. A part of the benefit will be seen in our FY16 balance sheet. It is an all cash deal.

While the Indian business of Kuoni will be acquired through internal accruals, the acquisition in HK will be funded through a mix of debt and equity,” Madhavan Menon, Managing Director, Thomas Cook (India) told The Hindu.

This acquisition is expected to help TCIL, essentially a fragmented player in the travel industry, to strengthen its inbound and outbound tour offerings and consolidate its base in the market.

In the past, the company had in fact tried to scale up its operations in these segments but it was not so successful.

“Our acquisition of Kuoni India gives us significant synergies across our key business lines of inbound, outbound, business travel, MICE and domestic.

“Additionally, SOTC and Sita, are highly respected brands which enjoy a strong customer connect in the India and inbound markets respectively,” Mr. Menon said.

The acquisition also gives TCIL an opportunity to undergo a name change as its licence to use the Thomas Cook brand name would expire in 10 years.

“Since we will be allowed to use the Thomas Cook brand till 2025, the acquisition offers us a viable brand transition opportunity. SOTC has a strong brand recall,” Mr. Menon said.

The acquisition of Kuoni’s HK business will give Thomas Cook (India) a foothold in China as HK is considered China’s gateway.

“China is a significant outbound market and since we are not allowed to enter (open base) China, Kuoni’s business in HK offers us a foothold to help us tap into that market and from there we also foresee lot of potential for Asia,” Mr. Menon added.

Kuoni HK is a profitable business with growth of approximately 40 per cent over the previous year and TCIL expects continued growth at over 25 per cent year on year.

Around 1,800 employees of Kuoni in these two jurisdictions will be retained and TCIL will allow the respective management teams to run the businesses separately. The people strength at TCIL is 2,930.

“We want to partner with the management teams of Kuoni India and Kuoni HK and will give them full freedom to run and grow the businesses. As per the policy of Fairfax, we will allow these companies to run independently. We firmly believe that since they know the business, they can run it well. Our focus will be on governance and integration.

Culturally Thomas Cook and Kuoni have lot of commonality and both have European orientation. So there will be no problem in the integration,” Mr. Menon said.

TCIL sees strong synergies in its business lines and its intent is to leverage on each other’s strengths to drive synergistic benefits for its stakeholders, company officials said. The acquisition of Kuoni’s India’s travel operations gives TCIL access to their 21 owned offices and 85 franchisees. This will add to TCIL’s network of 232 locations including 23 airports; 115 franchised outlets, and 112 preferred sales agents.

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Printable version | Nov 14, 2018 5:54:20 AM | https://www.thehindu.com/business/Industry/thomas-cook-india-grows-through-acquisitions/article7519154.ece

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