Shares in Thomas Cook were up on the FTSE 250 after the travel group said that it would be merging its high street travel and foreign exchange businesses with that of The Co-operative Group, in a bid to create Britain's largest high street travel network.
Altogether the merger will create a network of over 1,200 shops on British high streets and is expected to create synergies of at least £35 million per year. In the year ended 30 September the retail business of Thomas Cook and The Co-operative Travel's retail businesses is expected to make an operating profit of £12.4 million.
Thomas Cook said that it would be rebranding its Going Places shops as Co-operative shops. A new company is also to be created which will be 70 per cent owned by Thomas Cook and 30 per cent by The Co-operative Group.
The new group that will be created will see Manny Fontenla-Novoa, CEO of Thomas Cook, become Chairman, while Ian Derbyshire, CEO of Thomas Cook's UK business will become CEO. From The Co-operative Group Finance Director Paul Hemingway will serve ain the same position in the new group.
The merger of the new group is expected to take place in December, assuming that it receives anti-trust clearance.
Manny Fontenla-Novoa, Chief Executive Officer of Thomas Cook, commented, "This transaction represents a significant consolidation opportunity in the UK travel market and, by joining forces, we will create the country's largest high street travel network and reach a far wider customer base. By consolidating the high street in tandem with delivering on our existing e-commerce targets, we are realising our strategic aim to increase in-house distribution and strengthening our proposition to consumers.
"Today's announcement, together with our plans to cut costs and streamline the rest of our UK business, will put us in a much stronger position, should market conditions in the UK remain weak, and will build a firm foundation for the future. For our shareholders, this transaction will deliver synergies, be earnings accretive and unlock significant value for no initial cash consideration."
Peter Marks, CEO of The Co-operative Group, said, "This is a marriage of two of the industry's most trusted brands - The Co-operative and Thomas Cook. And, it comes at a time when consumer confidence in the travel sector, like the economy, is in need of a boost. Through our new found scale we will secure a profitable and successful business together, which will be good for our people and our members. Our customers will also benefit as we work to ensure that the merger leads to enhanced value in the holidays that we offer. It also offers excellent opportunities for the further development of the Co-operative Travel brand both on the high street and other channels to market.
"This deal is in line with The Co-operative Group's wider strategy to grow its business through merger and acquisition and when opportunities exist, to link with like-minded brands which share our values so as to improve our offer to our customer members through the additional scale benefits they can bring."
By 09:05 shares in Thomas Cook were up 3.79 per cent on the FTSE 250 to 186.40 pence per share.