Thomas Cook enters Russian market

25th Nov 2010 07:02

Travel firm Thomas Cook is to enter the Russian market through a joint venture with a leading Russian holiday company.Thomas Cook and VAO Intourist, Russia's longest established travel business, will form a joint venture focused on expansion in Russia and the other CIS (Commonwealth of Independent States) countries.The British company will own a 50.1% holding in the joint venture (JV), initially paying a maximum consideration of $45m for the stake, to be satisfied through the issue of $35m of Thomas Cook shares with the rest satisfied in cash.There may be a further adjustment of up to $15m by way of repayment of part of the initial consideration, or an increase in Thomas Cook's shareholding, if 2012 earnings before interest, tax, depreciation and amortisation (EBITDA) is less than $15m; this adjustment will be based on a multiple of 6 times 2012 EBITDA.Thomas Cook has call options, and VAO Intourist has put options, under which Thomas Cook may acquire the remainder of the shares in the joint venture over the next five years.Thomas Cook said the creation of the JV reflects the group's long-stated strategic objective to capture growth in emerging markets and its aim to enter the fast-growing Russian market.The JV will benefit from Thomas Cook's scale in accommodation purchasing in key destinations, as well as its product know-how and information technology systems. This, combined with the expertise of the Intourist management team, will enable the joint venture to improve its product offering and expand its destination portfolio which is expected to drive future sales growth and profitability, the company said.