Anglo-German package holiday company TUI (TUI) has raised some much needed cash after selling its luxury and expedition cruise arm Hapag-Lloyd for €700m.
But the firm will still be able to benefit from future growth by the business having sold the cruise division into its 50/50 joint venture, called TUI Cruises, with Royal Caribbean.
The deal for the JV to buy Hapag-Lloyd Cruises, a leader in German-speaking markets, is valued at €1.2bn in total on a debt and cash free basis, with the transaction expected to complete in the summer.
After an initial jump to 865p in early morning trading, trading in TUI’s shares has been more muted as the morning has progressed with its share price now up around 0.6% to 856p.
TUI said the agreement, which is expected to generate a ‘considerable book gain’ for the firm, will still allow it to participate in growth of the global cruise industry but at a lower level of capital expenditure.
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The company said, ‘With the transaction, TUI and Royal Caribbean Cruises have agreed to further expand their partnership by using the proven joint venture structure of TUI Cruises also for the luxury and expedition cruise segment.
‘The partnership combines the shipbuilding, operational and digital expertise of Royal Caribbean and the strong brand and distribution power of TUI.
‘The transaction is in line with TUI's previously stated objective to deliver additional profitable growth at a lower level of capital intensity.’
It added that in light of the transaction it is anticipated the Hapag-Lloyd’s fleet will grow in the coming years, as it is expected that the ‘demand for luxury and expedition cruises will continue to grow.’
The cash from the deal will come in handy for TUI, which is currently saddled with €1.1bn in net debt as it invests in what it calls ‘accelerated strategic growth’ and ‘digital transformation initiatives’.
