TUI Sells Hotelbeds Business

European tourism group TUI is selling its Hotelbeds unit to private equity group Cinven and Canada Pension Plan Investment Board (CPPIB) in a deal worth EUR€1.165 billion (USD$1.3 billion).

TUI put its Hotelbeds unit, which sells hotels rooms to wholesale customers such as travel agencies and tour operators, up for sale because it did not fit with its other tour operating, cruise and hotel businesses.

Hotelbeds is the largest business globally of its kind with a market share of six percent. Headquartered in Palma de Mallorca, it reported turnover of EUR€1.06 billion and underlying EBITA of EUR€69 million in the year to end September 2015.

Cinven and CPPIB will back the existing management team and share governance of the business equally, said Shane Feeney, Head of Direct Private Equity at CPPIB, adding that he expected to use Hotelbeds as a platform for future purchases.

The sale comes two months after private equity firm EQT took Swiss travel firm Kuoni private for CHF1.35 billion Swiss francs.

The proceeds of the sale will be used to invest in further growth and strengthen TUI's balance sheet, TUI said, adding the transaction is expected to complete by the end of September.

TUI will likely invest in its hotel operating business and in attracting more business from Chinese customers, chief executive Fritz Joussen was quoted as saying in an interview with German magazine WirtschaftsWoche.

CPP and Cinven will look to expand the company's hotel base in the Middle East, Asia and the Americas and to invest in its technology.