HANOVER, Germany:
TUI AG announced that it has agreed to acquire CP Ships Limited, a leading Canadian container shipping company, in an all-cash transaction for 1.7 billion euros (US$2.0 billion), or US$21.50 per share. As of June 30 this year, net debt of CP Ships was 261 million euros (US$316 million).
Pursuant to the terms of a support agreement between the companies, the board of directors of CP Ships has unanimously recommended that shareholders of CP Ships accept the offer.
"This transaction will enhance growth opportunities over the longer term and will enhance value for TUI's shareholders through CP Ships' earnings potential and the realisation of synergy potential in operations and ship networks," said Dr. Michael Frenzel, CEO of TUI AG. "Our enlarged shipping business will be well positioned to take advantage of the strong long-term growth dynamics in the container shipping industry. This is both a compelling financial and strategic opportunity for us."
ACCELERATED GROWTH
The acquisition of CP Ships will accelerate the growth of Hapag-Lloyd, TUI's container shipping business. The combined company will be a top five player, based on capacity, in the worldwide container shipping market and an important service provider across the North Atlantic. It will also offer stronger coverage in the Far Eastern, Australasian and South American trade lanes. In addition, Hapag-Lloyd believes its significantly increased size and presence in the world's shipping lanes will increase its attractiveness to partners in alliances.
"The combination of Hapag-Lloyd and CP Ships will create a company with the strength and scale to compete effectively in an industry where consolidation is changing the landscape. Furthermore, the combined company will offer enhanced resources and opportunities for both CP Ships' and Hapag-Lloyd's customers and employees," said Michael Behrendt, CEO of Hapag-Lloyd.
"The board of CP Ships undertook a review of our business and its potential opportunities. This transaction represents immediate and attractive value for our shareholders and the board has recommended it unanimously," said Ray Miles, CEO of CP Ships.
Hapag-Lloyd has developed post-acquisition integration plans which contemplate a synergy potential of approximately 180 million euros per annum by the third full year following completion of the acquisition. TUI expects integration costs to amount to approximately 100 million euros, mostly occurring during 2006. TUI expects the acquisition to be earnings per share enhancing at least post integration, which is expected for 2008.
The combined group currently operates 139 ships (with a further 17 on order) delivering capacity of approximately 400,000 TEU on over 100 routes spanning the globe. Before the effects of consolidation the combined shipping business would have had sales of approximately 5.7 billion euros and EBITDA of 588 million euros in 2004.
TUI has supported the successful development and organic growth of Hapag-Lloyd since its acquisition in 1997. The acquisition of CP Ships fits both this growth strategy and TUI's strategy well, which builds on two strong businesses in tourism and shipping and enables the group to take advantage of the expected market growth in both sectors.
TUI's offer to acquire CP Ships will be subject to customary closing conditions, inter alia, its acceptance by shareholders representing two thirds of the outstanding CP Ships shares on a fully diluted basis and the receipt of necessary regulatory approvals in Canada, the United States, Europe and certain other countries where the businesses currently operate. TUI anticipates mailing the offer to shareholders as soon as possible and closing the transaction during the fourth quarter of this year. Following the successful closing of its offer TUI plans to increase its holding in CP Ships to 100 per cent. TUI has secured necessary bank financing to fund the offer.
