Shares in First Choice holidays shot up almost 13 per cent yesterday to a record high of 257p each after the company revealed that it was talking to more than one party about offloading its package tour business.
The announcement came after MyTravel, a rival company, confirmed reports that it had approached First Choice with a cash offer for the business. MyTravel, which plans to finance the bid with a mixture of new debt and equity, said that synergies could deliver significant value to shareholders of both companies.
Analysts put the price of the business, which is widely thought to have weathered the downturn in package travel better than most, at about £500 million.
First Choice said that the MyTravel offer was only one of a number of options open to the company, which included restructuring or keeping the business. “Discussions with a number of parties are at a preliminary stage,” First Choice said. Sources at the company hinted strongly that an agreement with MyTravel was far from a done deal.
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Shares in First Choice leapt 29½p to close up 12.97 per cent on the prospect that First Choice would have an opportunity to concentrate on its growing adventure and short-break operations. MyTravel’s stock rose 7.13 per cent to 214p a share.
First Choice did not name any other potential buyers, but candidates could include TUI, the German holiday company, and Thomas Cook, which is also German-owned. There were merger discussions between First Choice and Kuoni, the Swiss travel company, in July.
Analysts reacted favourably to the possibility of a deal between MyTravel, which runs the Going Places travel agencies, and First Choice.
Morgan Stanley said that the disposal would be “strategically and financially compelling” for First Choice.
ABN Amro, Merrill Lynch, Panmure Gordon and Evolution upgraded their recommendations on the travel company to “buy”. MyTravel first tried to purchase First Choice in 1999. Operating then under the name Airtours, MyTravel scuppered a nil-premium merger between First Choice and Kuoni with a £950 million hostile bid for First Choice. The bid eventually was vetoed by European competition authorities.