A spokesman for Thomas Cook at the company's headquarters in Germany yesterday confirmed the two companies have been holding talks - but insisted the possibility of a merger had not been discussed. Kuoni could not be reached for comment.However, the source said the negotiations, which began in March, had originally centred on the possibility of the two companies sharing airline operations, but were understood to have since moved on to the consideration of a full-blown merger.
Thomas Cook is one of the largest high street travel operators in the UK, with six branches in Glasgow and more than 100 in the rest of Scotland. It also operates a call centre in Falkirk and employs about 28,000 people across Europe. The company, like its rivals, has battled the world-wide decline in tourism by cutting costs, and last October axed 200 jobs at a call centre in Clydebank, following the transfer of the operation to India.
The Thomas Cook spokesman said: "Thomas Cook has good contacts with its industry partners, and Kuoni is no exception. But there are presently no mergers talks with Kuoni. "Given the condition of the industry, this is just another rumour about consolidation. I am unable to comment further."
Holiday companies have been suffering a slump in tourism since the September 11, 2001, attacks on the US, with the economic downturn, the threat of further terrorism, the war in Iraq, and the outbreak of the deadly Sars virus adding to their woes. According to a report in the Sunday Telegraph, Thomas Cook - which was sold out of UK ownership in 1992 and is now controlled by German airline Lufthansa and department store retailer KarstadtQuelle - has hired Morgan Stanley to advise the company on the deal. Kuoni, the newspaper reports, is being advised by Credit Suisse First Boston.
The Sunday Telegraph also reported that in the event of a merger, Thomas Cook's owners would control a 60% stake in the new company. The paper said the two companies had agreed the main points of a deal, including arrangements to satisfy the demands of the Kuoni and Hugentobler Foundation, which was formed to protect Kuoni from a hostile bid. Kuoni attempted a merger with the UK's First Choice Holidays in 1999, but abandoned the deal after a counter bid from MyTravel, then known as Airtours. It was unclear yesterday if First Choice would now rekindle its interest in Kuoni.
The source said the attraction of a Thomas Cook-Kuoni merger is that it gives Kuoini access to Thomas Cook's giant package holiday business with lucrative brands such Club 18-30 and Neilson in the UK. Meanwhile, Thomas Cook would gain access to Kuoni's upmarket offerings to exotic destinations, which include Nile cruises in Egypt, holidays in the Maldives, and icebreaker cruises to the North Pole.
A merger also makes economic sense. The enlarged group would become the world's largest holiday company, with sales of about (pounds) 7.4bn. Thomas Cook has net debt of about (pounds) 700,000.
Earlier this year, the head of Thomas Cook said bookings for the summer season were down slightly from last year, but repeated the firm aimed to break even in its current business year. "The year 2003 isn't going to be a walk in the park, but we're ready for it," Stefan Pichler, chief executive, said, adding the group expected to return to profit in its fiscal year to October 31.
Thomas Cook last year posted a pre-tax loss of about (pounds) 96m on sales of about (pounds) 5.7bn, (pounds) 1.9bn of which came from the UK. Meanwhile, Kuoni reported net profits last year of (pounds) 12m on sales of (pounds) 1.7bn.