TUI Readying IPO of Hapag-Lloyd Stake

November 26, 2010

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Europe's biggest tour operator TUI is on the starting blocks to float its stake in shipping group Hapag-Lloyd, taking advantage of positive market sentiment.

The IPO of Hapag-Lloyd is seen as a first step in a strategic reshuffle at TUI, which is expected to lead to combining TUI and its British unit TUI Travel in 2012, company and financial sources have said.

TUI until a few years ago had two main businesses, tourism and shipping. It then merged its travel operations with Britain's First Choice in 2007, floating a minority stake in the new business on the London Stock Exchange.

A year later, it agreed to sell a majority of Hapag-Lloyd to the Albert Ballin consortium of investors so TUI could focus on tourism. But the financial crisis derailed the deal.

TUI ended up keeping a larger-than-planned 43 percent stake in Hapag-Lloyd, which it aims to divest. The stake will increase to almost 50 percent by year-end following an exercising of a convertible bond.

Some experts believe that TUI will not sell the whole Hapag-Lloyd stake at once, but keep some shares to benefit from a possible share price rise following the IPO.

"TUI may sell roughly half of its stake next year, just enough to drop below the 25 percent threshold," an investment banker said.

TUI is taking advantage of a recent rise in equity markets, which has helped support a resurgence in European IPOs.

(Reuters)