Fairfax Group Offers To Take Complete Control Of Thomas Cook India

05/22/2012| 09:14am US/Eastern

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-- Fairfax offers to buy out Thomas Cook India's public shareholders

-- Fairfax offers INR65.48 a share for 23% public shareholding

-- New owners to retain Thomas Cook India's current management team

-- Company to retain brand name until 2025

(Recasts; adds share price in 2nd paragraph, analysts comment in 8th paragraph, comments from Thomas Cook executive in 9th-12th paragraphs.)

By Anirban Chowdhury and Ashutosh Joshi

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Canada's Fairfax Financial Holdings Ltd. (FRFHF) has offered to buy out Thomas Cook India Ltd.'s (500413.BY) public shareholders at INR65.48 a share, following its deal to acquire Thomas Cook Group PLC's (>> Thomas Cook Group plc) 77% stake in the Indian travel services provider.

The offer is 7% more than Thomas Cook India's closing share price of INR61.20 Monday. On Tuesday, the shares ended 2.4% up at INR62.65 on the Bombay Stock Exchange, compared with a 1.0% fall in the benchmark index.

Toronto-based Fairfax's said Monday it will buy Thomas Cook Group's entire stake in the Indian company for about $150 million.

Indian laws require a company that acquires 25% or more of another to make an open offer to buy an additional 26%. In this case, the public shareholding is less than 26%.

Financially strained Thomas Cook Group will likely use funds from this sale to repay its debt, which analysts peg at more than GBP1 billion.

A slowdown in global demand for travel, primarily due to the economic uncertainty that looms over European markets, has hit Thomas Cook's finances, pushed its losses up and left it drained of cash reserves.

Thomas Cook had agreed to sell its Spanish hotel chain Hotels Y Clubs De Vacaciones for GBP61 million in December. It also sold its rights in to the Explorers Hotel, a 3-star hotel near Disneyland, Paris, to Verquin SAS for EUR3.4 million or GBP2.9 million.

"The priority for the company right now is to improve its indebtedness and liquidity position," Nick Batram, an analyst at London-based brokerage Peel Hunt said, adding that it will likely announce more such asset sales.

The Indian unit's managing director, Madhavan Menon, told news channel CNBC TV18 that the company's current management team will retain its place after the deal. The new owners will also retain the Thomas Cook brand until 2025.

"You will see a fair amount of activity in Thomas Cook in the coming months as we chalk out our plans under the new majority shareholder," he said.

He said shifting its ownership to a financial holding company from a travel firm won't necessary change the Indian company's business model.

"Even though Thomas Cook was the majority shareholder, we (the Indian unit) had little or no business with them," he said. "so their going away as a majority shareholder won't impact us at all."

-By Anirban Chowdhury and Ashutosh Joshi, Dow Jones Newswires; 91-22-61456108; anirban.chowdhury@dowjones.com

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