TUI Travel and its German parent company, TUI AG, have reached an agreement in principle on the key terms of a possible ‘all-share nil-premium’ merger.
If it goes ahead, the two companies said it would bring potential cost savings of at least £36 million a year, alongside certain cash tax benefits.
A statement said the merger would also allow the two companies to simplify the current group structure to "unlock further value within the businesses".
This would allow them to to accelerate growth of the core mainstream business through increased investment in digital platforms to drive customer numbers.
Meanwhile, non-core businesses, including the online accommodation businesses and specialist and activity sector of TUI Travel, will be run separately and "maximised for value", and the Hapag-Lloyd stake to be held for disposal
Alexey Mordashov, the largest shareholder in TUI AG, has indicated his support for the merger, but the statement said discussions remain ongoing and there can be no certainty that an offer will be made.
TUI Travel was formed in 2007 through a merger between First Choice and TUI AG’s travel business. It is 55% owned by the Hanover-based company.
Shares in TUI Travel were up 4.8%, while shares in AG rose 4.5%, according to Reuters.
