Thomas Cook is set to take over the Co-operative Travel joint venture.
Five years ago, the Co-operative Group and Central England Co-operative formed a joint venture (JV) with Thomas Cook.
The deal saw all three travel firms bring together their store estate into one company that was 70% owned by Thomas Cook and 30% by the Co-operative Group. Central England Co-op, which was then Midlands Co-op, later joined the deal and took a 3.5% share, which came out of Thomas Cook’s stake.
Though, later, Central England Co-op acquired 20 travel stores, independent of the joint venture, when it merged with Anglia Co-op in 2013. Those are still being retained and operated by the society. In addition, Chelmsford Star Co-op operates two branches under The Co-operative Travel brand.
Other co-operatives to also run travel divisions include Midcounties, Lincolnshire, Channel Islands and East of England.
During the fifth year of the joint venture, both the Group and Thomas Cook had the option to sell or purchase the ‘co-op’ stake in the business.
The Group has notified Thomas Cook of its decision to sell, which requires the plc to buy-out its stake. Under the terms of the deal, Thomas Cook will pay £50m for the Group’s 30% share and £5.8m for Central England’s 3.5% share. A payment schedule has also been agreed for the guaranteed minimum dividend of £31.9m, with £20m due on 3 January and the remainder on 3 April. Interest will be payable on both instalments.
Following completion, which is expected to be November 2017, Thomas Cook will own 100% of the UK retail store’s Travel business.
The joint venture currently has 764 stores in the UK across two brands: Thomas Cook and The Co-operative Travel. Thomas Cook has retained the right to use The Co-operative Travel brand until November 2018.
Thomas Cook chief executive Peter Fankhauser said: “Over the next two years, we will bring all of our UK stores under the Thomas Cook banner so we can make full use of the best brand in travel.”
Rod Bulmer, chief executive of consumer services at the Group, said: “We have enjoyed a successful partnership with Thomas Cook through the joint venture. Going forward, having a minority stake in a travel business does not fit with the strategy of the Co-op. The financial arrangements for exit that were put in place as part of the original JV agreement represent the best value for our members. The payments we receive from the exit will be used to invest in our core business areas.”
In an update to staff, Mr Bulmer added: “Because of the financial arrangements for exit that were put in place as part of the original agreement, after careful consideration, we believe that ending the venture now will provide best value for our members.”
Mr Fankhauser added: “Our relationship with the Co-op has given us a strong presence on the high street and fantastic colleagues across the UK, both of which are so important in attracting and inspiring our customers. This purchase gives us full control over our retail store network, enabling us to better integrate our stores with our online offering, while also helping us to focus on growing sales of added extras such as holiday-related financial services.”
The Co-operative Travel service goes back over 110 years, to the Co-operative Wholesale Society‘s excursion department that opened in 1905. Initially offering trips on railways, in 1920 it published its first overseas holiday guide.
In the 1950s, CWS Travel became one of the five largest travel agencies. In 2000, it was known as Travelcare, following the merger between Co-operative Wholesale Society and Co-operative Retail Services, which became the Co-operative Group.
