MyTravel, the British tourism giant that
started in 1972 as Airtours, is talking to First Choice Holidays
about the possibility of purchasing First Choice's mass-market,
packaged-tour business.
The companies, two
of the largest tour operators in the U.K., confirmed last week that
they are in preliminary discussions.
The board of
MyTravel said it believes that the opportunity to pick up First
Choice's mainstream businesses "could deliver significant value to
both First Choice and MyTravel shareholders, given the value of
potential synergies and other consolidation benefits," according to
a statement from MyTravel.
First Choice,
another British travel giant that sells practically every kind of
travel product, made significant inroads into the North American
market in 2006 with its purchases of Intrav and seven luxury tour
operators under the Grand Expeditions name.
If First Choice
unloads its mass-market business, it will be able to focus more on
its high-end products.
Both MyTravel and
First Choice have seen their mass- market businesses challenged in
recent years. Margins have been squeezed by increased price
competition from low-cost carriers and the price transparency of
the Internet.
MyTravel came
perilously close to collapse when it chalked up net operating
losses of $1.6 billion in 2003. But the company implemented a
turnaround plan that included the sell-off of several
divisions.
MyTravel had said
it expected to return to profitability in 2007 for the first time
since 2001.
If MyTravel does
make an offer, it will be in cash, financed through new debt or
equity. The offer could include issuing equity to First Choice
shareholders.
But MyTravel also
reported that discussions are at an early stage and that there is
no certainty that any transaction will occur.
First Choice
reported it is "considering a range of alternatives in this market
and that discussions with a number of parties are at a preliminary
stage."
"There can be no
certainty that any transaction will be forthcoming," First Choice
added.
To
contact reporter David Cogswell, send e-mail to [email protected].