Source: Lloyds ListCarnival is over for Airtours cruise shares link
Tuesday May 22 2001
CARNIVAL Cruise is unwinding its five-year equity relationship with Airtours, a leading European tour operator, at a profit that could run to $200m, writes Tony Gray.
The world’s largest cruise company said a shift in Airtours’ corporate strategy had triggered the decision to dispose of its 25.1% shareholding.
At yesterday’s closing price of 287p, Carnival’s 123.3m shares, which will be placed in the market, were worth £354m ($507m).
When Carnival acquired its Airtours stake in April, 1996 it paid $300m.
Airtours’ shares reacted badly to the news, initially falling 23p.
But the response was more to do with the dampening effect on demand of the Carnival shares returning to the market, rather than shock at the dissolution of the equity relationship.
Right from the start, it was emphasised that the Carnival-Airtours equity relationship was not intended to develop into a takeover bid.
Given that Carnival no longer prized its stake in Airtours, analysts said a placing was the best option for the UK group.
The market was of the view that the Airtours holding would not have readily found a buyer as there was no obvious potential partner.
For the stability of the company, it was better to have the Carnival holding spread among institutions than in the hands of one large shareholder.
The seeds of yesterday’s announcement were sown 14 months ago when the UK’s second largest package holiday company bought Travel Services International, a major distributor of leisure travel products in the US, for £242.7m.
Travel Services has “leading positions” in the distribution of cruise, car rental, alumni holidays and hotel bookings.
At the time of the Travel Services deal, Airtours chairman David Crossland felt obliged to resign from the Carnival board of directors.
This was followed six months later by Carnival buying Airtours’ 50% stake in Costa Cruises, the Italian cruise operator the companies jointly acquired in December, 1996.
Carnival’s chairman and chief executive Micky Arison said: “The strategic reasons for Carnival’s continued minority ownership in Airtours is no longer compelling, and we now believe that it is the appropriate time to consider exiting this relationship.”
Airtours said it had agreed to release Carnival from a share lock-up agreement between them.
However, both sides insisted the important commercial relationship between the two companies would be unharmed despite the unravelling of the equity stake.
Airtours is now the biggest distributor of Carnival cruises in the US.
The placing is being handled by investment banks UBS Warburg and Deutsche Bank, acting as joint book-runners.
Shares in Airtours recovered from the early falls to end the day only 5p down as investors warmed to the first half figures.
Seasonally-influenced operating losses before e-commerce costs, exceptional items and goodwill were £77.4 for the six months to March 31.
This was against restated losses of £70.7m in the corresponding period of the previous year.
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