Thomas Cook moves into growing Russian market

Thomas Cook broke into the fast-growing Russian market yesterday by unveiling a joint venture with one of the country's oldest travel agencies.

The partnership with VAO Intourist will look to tap into the country's strong demand for beach and family holidays, particularly to Turkey and Egypt.

More than six million Russians went on overseas, packaged holidays last year and the market is expected to grow by a double-digit percentage in the coming years, given the increasing wealth of Russia's 142 million population.

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The venture will utilise Thomas Cook's scale in accommodation and purchasing in key holiday destinations, as well as its IT systems.

The UK-based holidays giant will have a 50.1 per cent stake in the new business, which will include Intourist's network of 144 shops covering large parts of the country.

Intourist, which was founded in 1929 and privatised in the early 1990s, carried more than 650,000 passengers last year and is one of Russia's leading travel brands. The company's hotel division is not included in the deal.

Thomas Cook will initially acquire a 50.1 per cent stake in the new company for a maximum of 45 million US dollars (28.5m), with the option to purchase the remainder of the shares over the next five years.

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Intourist's existing management team will continue to run the business on a day-to-day basis.

Thomas Cook chief executive Manny Fontenla-Novoa said: "The move into Russia is in line with our established strategy of capturing growth in emerging markets.

"I am glad we have taken our time to secure a strong partnership and a financially attractive transaction."

VAO Intourist is majority owned by Russian consumer services firm Sistema, with the remainder held by the Moscow city government.

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The deal is conditional on competition clearance in Russia and is expected to complete by February.

In March, two sources close to negotiations said that a full takeover of Intourist by Thomas Cook was being discussed as an option.

Thomas Cook and its rival, TUI Travel, majority owned by Europe's top travel agency TUI of Germany, are increasingly turning to emerging markets such as Russia and China for growth as cost savings from the creation of their companies in 2007 are close to being fully realised.

Also, the British and German tourist markets are considered relatively mature.

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Intourist was the monopoly provider of travel services in the Soviet era. Russia's oil-to-telecom holding company Sistema acquired the business in 1994.

Following a restructuring in 2005, it was selling holidays to Russian tourists travelling domestically and also to international visitors.

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