Thomas Cook buys Kuoni Group’s India travel business

Thomas Cook will take on the approximately 1,800 employees of Kuoni's business units and will continue to run the business as an independent company

Mumbai: Tour operator Thomas Cook (India) Ltd has signed an agreement with Kuoni Group to acquire its entire travel businesses in India and Hong Kong for 535 crore, according to a filing with the BSE.

The Kuoni brand is licensed to Thomas Cook for one year in India and for five years in Hong Kong. All other brands of Kuoni such as SOTC, SITA and Distant Frontiers are transferred with the business.

As part of the acquisition, Thomas Cook will take on the approximately 1,800 employees of Kuoni’s business units in India and Hong Kong and will continue to run the business as an independent company.

Thomas Cook is promoted by Fairfax Financial Holdings Ltd through its wholly owned subsidiary.

The acquisition is expected to help Thomas Cook to enhance its offerings on inbound (bring foreign tourists into India), outbound (taking Indian tourists abroad) and corporate travel (facilitating travel for company executives). Brands of Kuoni, especially SITA, is strong in inbound offerings.

The acquisition of Kuoni’s tour operating and retailing business in India and Hong Kong as well as the Indian inbound business reaffirms the company’s belief in the Indian market’s potential and also company’s strategic intent to explore viable locations, including the larger Asia opportunity, said Prem Watsa, chairman and chief executive officer of Fairfax Financial Holdings, the controlling shareholder of Thomas Cook.

In January, Kuoni Travel India (Pvt.) Ltd, part of Switzerland’s Kuoni Group, had decided to sell its tour operating business and focus on its core business of corporate travel, as part of a global restructuring.

The sale follows a strategic decision by the Kuoni board to focus the firm’s activities on its core business as a service provider to the global travel industry and governments. The group will now have three divisions: global travel distribution, global travel services and VFS Global.

“With the sale of the tour operating activities in India and Hong Kong, we have completed the sale of the outbound business as announced in January. I’m very pleased that we found forward-looking solutions for all the units. The inclusion of the Indian Destination Management Specialists in the deal provided Kuoni Group an opportunity to conclude a timely transaction at attractive terms. We expect the closing of all transactions in the course of 2015, allowing Kuoni to focus on the further development of its core business," said Peter Meier, chief executive officer of Kuoni Group.

Experts are not convinced.

“Indeed, this deal will make Thomas Cook an unparalleled leader in inbound, outbound and corporate. But I doubt whether the company would be able to secure necessary approvals from regulators including Competition Commission of India considering both are dominant companies in the respective areas," a travel consultant said, requesting anonymity.

The transaction remains subject to regulatory approvals, Thomas Cook said in a statement. “The acquisition is obviously a move to grow the tour operator business of Thomas Cook. Kuoni’s India division has been one of the fastest growing markets for them. While brand Kuoni operates in the high-end segment, its SOTC comes up with products for the masses. Through this acquisition, Thomas Cook has an opportunity to tap Kuoni’s its vast customer base and access its existing mixed product portfolios," said Chetan Kapoor, research analyst, Phocuswright, a travel researcher.

“There is definitely a synergy that they can be exploited to enhance its business across segments. Kuoni along with its subsidiaries caters to travellers across the board whether its inbound, outbound and domestic," Kapoor said. “However, it remains to be seen how they try to draw benefit out of this merger."