TUI pulls the trigger

German travel syndicate TUI has moved closer to a transformative deal in which it will exit the containership arena by offloading its stake in Hapag-Lloyd.

TUI will pay down debt with the proceeds.

TUI says the transaction, which will see its holding in Hapag decline to around 22%, will boost cash inflow by approximately EUR 700m ($916.5m) by June 2012 and includes a provision that will set the stage for the sale of remaining shares to third-party investors.

“In order to completely exit container shipping, TUI will obtain the right to call for an (inital public offering) IPO with priority placement of the shares held by TUI any time as of end of June 2012,” it said in a late-breaking message to German securities regulators.

In a note to clients Hapag CEO Michael Behrendt applauded the deal, which is subject to approval by Albert Ballin’s shareholders, as it will further strengthen the operator’s ties with Hamburg, its hometown, and the city’s port, which the company described as its "most important customer".

TUI transaction in steps (source: TUI):

• February 2012: Hapag redeems a portion of TUI-backed “hybrid II” financing worth EUR 100m.
• March 2012: Albert Ballin acquires “hybrid II” capital worth EUR 125m at "nominal" value from TUI.
• Subsequently, both Albert Ballin and TUI transfer EUR 125m of the “hybrid II” capital to Hapag in exchange for new shares. As a result, TUI’s stake in Hapag temporarily rises from 38.4% to 38.5%.
• By 29 June 2012: Albert Ballin acquires a 17.4% stake in Hapag from TUI for a purchase price of EUR 475m. TUI’s stake in Hapag-Lloyd declines to around 22%.
• April 2013: Subject to the terms and conditions of the bonds issued by Hapag in 2010, Hapag submits a buyback offer to TUI to repurchase further Hapag-Lloyd shares worth EUR 37.5m in total, which will further reduce TUI’s stake in Hapag even further.

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