Thomas Cook merger with Co-op provisionally green-lighted

The Competition Commission has provisionally given the go-ahead for beleaguered Thomas Cook to form a retail travel agent joint venture with the Co-operative.

Thomas Cook plans a venture with the Co-operative Group and Midlands Co-operative Society that creates a company with an initial estate of 1,240 travel agent stores.

The intention is for the stores to retain their current brands. Thomas Cook would own 70% of the new entity.

It will continue to operate its tour business separately from the joint venture.

The travel company has just started a root and branch review of its business after posting its third profit warning in 12 months. Full-year profit is now expected to be £320m, down from £362.2m the previous year and the economic uncertainty, unrest in the Middle East and the rising cost of fuel are all cited as factors.

Some of the company’s shareholders have questioned the joint venture strategy. The company’s share price continued to drop at time of writing.

The Office of Fair Trading referred the proposal to the Competition Commission in March over fears that it would disadvantage customers with rising prices.

However, the Competition Commission says that the extent to which travel agents respond competitively to nearby rivals “is quite limited”.

It adds: “We think that the threat of growth of rivals, entry by package holiday operators looking to ensure their route to market, and the increasing role of the internet further reduce the scope for price rises over time.”

The Competition Commission has given a deadline of 11 August to hear views on the provisional findings and expects to issue its final report on 16 August.

Thomas Cook says: “The merger will consolidate the parties’ high street networks; provide a broader distribution base; and it will enable the retail operations to be more cost effective with the rationalisation of back office operations.”

A spokesperson would not speculate on how back office mergers might affect marketing teams or whether branches will be closed.

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