TUI aims to exit shipping group to focus on travel arm

Chief executive Michael Frenzel said yesterday his preferred option would be an initial public offering but added that he was in no hurry.

"We currently see a favourable time window for exiting our Hapag-Lloyd position. Container shipping is healthy and on an upwards trend," Mr Frenzel said in a conference call after the group reported a 25 per cent rise in underlying 2009/10 profit.

TUI, which owns Europe's largest tour operator TUI Travel, saw shares rise. It was also helped by its forecast for a positive group result in 2010/11.

Analysts at WestLB welcomed the optimistic outlook so early in the new financial year.

"The attractive valuation in combination with several share price drivers in the coming weeks (for example, IPO of Hapag-Lloyd, further good booking situation for the summer season) makes TUI AG one of the most attractive stocks in the sector," they wrote in a note to clients.

TUI had previously planned to sell Hapag-Lloyd to a consortium, but falling freight rates and volumes as a result of the financial crisis meant it ended up pumping more money into the company and keeping a larger stake than it expected.

Now that trading has improved, TUI said earlier this month it planned to mandate Credit Suisse, Goldman Sachs and Greenhill to start preparations for a stock exchange listing of Hapag-Lloyd.

TUI owns 43 per cent of Hapag-Lloyd and this will increase to almost 50 per cent at the end of 2010 through the exercise of a convertible bond. It has previously valued its stake in Hapag-Lloyd at 2.5 billion euros.

Mr Frenzel said yesterday TUI was also considering selling its shares to individual investors. Logistics businessman Klaus-Michael Kuehne, part of the Albert Ballin consortium that owns 57 per cent of Hapag-Lloyd and majority owner of Kuehne + Nagel, is expected to increase his stake in the shipping firm after the IPO, sources said.

TUI reported underlying earnings before interest, tax and amortisation (EBITA) of 589.2 million euros for the 12 months to the end of September, compared with 470.5 million last year.

Turnover fell 1.5 per cent to 16.35 billion euros, hurt by the Icelandic ash cloud that grounded European flights for just over a week in April.

After staying at home during the recession, consumers are starting to book holidays again, with customers in Nordic countries in particular driving growth.

Both Russia and Brazil will be key areas for expansion in the future, Mr Frenzel added, with smaller acquisitions likely in Russia.