Thomas Cook has made its long anticipated move to enter the Russian market by paying $45m for a 50.1% stake in travel agency Intourist.
Founded in 1929, Intourist will give Thomas Cook access to the fast growing Russian market, which is expected to show double digit increases in coming years as the population gets richer on the back of strong economic growth. Thomas Cook will invest $10m in cash and $35m in shares for its stake in the business. The company's shares have risen 3p to 192p on the news. In a buy note KBC Peel Hunt said:
It's taken a while, but Thomas Cook has finally concluded a deal in Russia. This is not a huge deal, but an important foothold. Russia is a growing, if volatile, emerging travel market and is viewed by both Thomas Cook and TUI Travel alike as a key strategic market. Like most travel markets, margins are slim, but volume growth potential is significant and improved IT and operating practices could see these (margins) improve. Early days, but on the whole we view the joint venture as a positive development.
Results due next week are likely to be accompanied by a cautious outlook statement. However, we continue to believe that the rating remains too low at the current point in the cycle.
