TUI Travel PLC signed a joint-venture agreement Wednesday with Russian firm S-Group Capital Management, a move enabling TUI to develop a tourism presence in Russia and former Soviet Republic countries, including Ukraine.
S-Group will own 51% of the joint venture, and British travel conglomerate TUI Travel will own 49%. It will be an investment holding company, financed proportionally by both parties. The partners are expected to invest up to $40 million in the new company by Dec. 31.
According to TUI Travel, the Russian and former Soviet Republic tourism markets “have experienced significant growth in outbound travel in recent years and present strong long-term growth opportunities,” the company said.
TUI said that 6 million Russians and 1 million Ukrainians traveled on traditional sun and beach holidays last year. That total is equivalent to one-third of the size of the U.K. sun-and-beach charter market, TUI said.
As part of the deal, TUI Travel agreed to acquire a 75% stake in certain assets of Russian tour operator and travel agency VKO Group, as well as a 75% stake in certain assets of Ukrainian tour operator and travel agency Voyage Kiev.
Additionally, TUI Travel and S-Group signed a letter of intent to own a 75% controlling stake in Russia-based Mostravel, a Turkey and Egypt specialist.
The board of the joint venture will consist of one member nominated by TUI Travel and one member nominated by S-Group.
S-Group Capital Management is backed by Russian businessman Alexey Mordashov, CEO and major shareholder of Moscow-based Severstal Group, a steel producer.