The Co-op could bank an £82m windfall this autumn as it unwinds the travel joint venture it formed with Thomas Cook five years ago.
The mutual’s annual report revealed it has the right to exercise an option from September under which the travel agent must buy the mutual’s 30% stake for £50m.
Under the deal agreed in 2010, Thomas Cook also agreed to pay the Co-op £32m of minimum guaranteed dividends between October and December this year. The original total was £37m and just £5m has been paid so far.
The Central England Co-operative, formerly the Midlands Co-operative, will also be in line for payments of at least £5m relating to its separate 3.5% stake in the joint venture.
The potential payouts come at a difficult time for Thomas Cook, which has suffered from troubles in Tunisia and Egypt.
If the buyout goes ahead the Co-op brand must be removed from the venture’s 230 stores over the following two years, under the terms of the original agreement. That will mean a refurb of a quarter of Thomas Cook’s travel agency estate.
The Co-op has yet to decide whether to exercise the option, but is considered almost certain to do so and the travel agent has made provision for the total payout.
Thomas Cook’s provision means that profits, expected to hit about £205m this year, will not be affected by the multimillion-pound payout that will fall into the group’s next financial year, starting in September. It will mean a potential squeeze on cash, however.
Mark Brumby, a leisure analyst at Langton Capital, said: “It’s fair to say this comes at a difficult time. It’s an irritant but it’s not life threatening.”
