Tui's shipping news

22 August 2005 By Fiona Maharg-Bravo

By snapping up CP Ships, the German conglomerate appears to have made an aboutface in its strategy of concentrating on tourism. With a E1bn rights issue looming, it will take a lot of convincing to get investors onside.

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Tui, The German tourism and shipping company, has made a $2bn (E1.7bn) offer for UKbased CP Ships, a 10% premium to Friday's closing price and a 25% premium to the average price in the last three months.

The combined group will become the fourth largest container shipping by capacity and will strengthen Tui's position in Asia, Australia and South America.

Tui said it plans to generate E180m in annual savings by 2008 and book E100m in costs next year. It expects the transaction to boost earning per share by 2008 at the latest. Meanwhile, the company plans to finance the transaction via a E1bn rights issue and additional debt. This will lead to a temporary increase in net debt, which the company expects to decrease again due to the shipping division's cash flow. Despite the increase in debt, Tui continues to target investment grade financial ratios.

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