Co-operative Travel to form Thomas Cook venture

In a deal announced last week, the Co-operative Group said its 401 stores and 103 branches owned by Midlands Co-operative will move into a new company, while Thomas Cook will transfer 803 outlets to create the UK’s largest travel prescence on the High Street.

The company will be 70 per cent owned by Thomas Cook and 30 per cent by the Co-operative Group — Midlands Co-operative will join as a shareholder in due course following the completion of final documents.

In addition to its retail shops, the Group will also transfer its home working business, national corporate travel business, web and call centre operations and Freedom Travel. The merged entity will not include Thomas Cook’s online travel business or any of its UK tour operating businesses.

It is also proposed a Co-operative Travel branded tour operator will be introduced with products based on Thomas Cook’s current Sunset brochure to be available from 2012. While Thomas Cook stores will retain its name, its 70 Going Places outlets will be converted to Co-operative Travel branding.

It is estimated that savings of £35 million are expected each year from cost reductions including the moving of headquarters to Thomas Cook’s base in Peterborough and consolidation of back-office functions, as well as shop closures and the streamlining of supplier contracts. The cost of delivering these savings is expected to be approximately £30m.

The venture is also set to lead to hundreds of job losses, which is expected to cost £13m in redundancy payments. There will also be no more than 100 store closures, according to Co-operative Group Chief Executive Peter Marks, who told the News: “There will be rationalisation of the combined network, but it isn’t going to be big. If there is a ball-park figure, it is going to be less than one hundred shops.” 

Added Mr Marks: “This is a marriage of two of the industry’s most trusted brands — The Co-operative and Thomas Cook. And, it comes at a time when consumer confidence in the travel sector, like the economy, is in need of a boost. Through our new found scale we will secure a profitable and successful business together, which will be good for our people and our members. 

“This deal is in line with the Co-operative Group’s wider strategy to grow its business through merger and acquisition and when opportunities exist, to link with like-minded brands which share our values so as to improve our offer to our customer members through the additional scale benefits they can bring.”

Martyn Cheatle, Chief Executive of Midlands Co-operative Society, added: “This is a significant move for Midlands Co-operative, but one that the Board and I believe to be the right one. This proposed joint venture will enable us to maintain our high street presence, but more importantly will enable us to bring our customers and members across the Midlands an even better choice in terms of holidays and competitive deals. 

“In addition members will also continue to benefit from earning member points for their bookings.”

The parties have agreed that, from inception of the new company, Thomas Cook Group CEO, Manny Fontenla-Novoa will serve as Chair; Ian Derbyshire, CEO of Thomas Cook’s UK business, will serve as CEO; and Paul Hemingway, Finance Director of 

Co-operative’s Travel and Specialist Retail businesses, as Finance Director. Thomas Cook will appoint three Directors to the Board, including the Chair, and the 

Co-operative Group will appoint two of the Directors. 

Co-operative Travel’s Managing Director Mike Greenacre is also to be part of the management team.

Subject to anti-trust clearance from the European Commission, which is expected by December 2010, the full merger is set to be completed by December 2011.

The deal also means the future of Co-operative Travel Trading Group is under review, which was formed in 2003 by the Group, Midlands and Midcounties as a cost-saving buying consortium.

Midcounties Co-operative’s Chief Executive Ben Reid said its 35 branches and internet business cooptravel.co.uk are not part of the deal and that the society will continue to sell holidays independently.

He told the News: “We were given the same opportunity, however, we are already well advanced with our own strategy and our board took the decision to follow through with those plans which will transform the business.”

Other co-operatives that retain independent travel operations include Anglia, Chelmsford Star, Channel Islands, East of England, Heart of England, Lincolnshire and Radstock societies.