Thomas Cook to expand presence in Russia with new joint venture
22 March 2019 - Thomas Cook Group announces that it has agreed to enter into a joint venture agreement with Ionic Invest, to buy the tour operator of Biblio Globus, one of the largest tour operators in Russia. The joint venture, in which Thomas Cook intends to assume a 30% minority stake, will give Thomas Cook a leading position in a growing market, help to further diversify the Group's customer base, and enable it to secure additional flight capacity to support the future growth in its existing Russian business.
Ionic Invest is owned by Sarpedon Travel, a leading destination management company (DMC) and longstanding partner of Thomas Cook Group.
Founded 25 years ago, Biblio Globus has around 3 million Russian customers, of which just over half holiday domestically within Russia and the remainder holiday abroad, with over 50 direct destinations on offer. Biblio Globus benefits from access to premium flight capacity through a stable long-term commercial relationship with Rossiya, a subsidiary of Aeroflot. On acquisition, Thomas Cook's existing Russian tour operating business will also benefit from this relationship, opening up further growth opportunities from Summer 2019.
Thomas Hohn, Chief of Continental Europe Source Markets, Thomas Cook, said: "The acquisition of Biblio Globus in partnership with Ionic Invest gives Thomas Cook a unique opportunity to expand our presence in Russia and tap into new opportunities in a growing market. With its strong brand, best-in-class technology and diversified destination mix, Biblio Globus will help strengthen our tour operating business in Russia while at the same time introducing a new group of customers to our own-brand hotels in the Eastern Mediterranean."
Under the terms of the agreement, the joint venture will acquire 100% of Biblio Globus' tour operator for an initial cash consideration of $10 million. Thomas Cook Group intends to acquire a 30% stake in the joint venture for a consideration of $3 million on completion, expected by the end of May 2019, subject to satisfaction of certain conditions precedent and receipt of customary regulatory approvals. The existing management team will continue to be involved in the business.
Further cash consideration of $10 million will be payable and funded by the joint-venture business in January 2020. An earn-out is also in place linked to achieving aggressive three-year operating profit targets. The total maximum cash consideration payable by the joint venture business, including the initial consideration, is $150 million. The earn-out payment will be wholly satisfied through internally-generated cashflows from the new joint venture business.
Biblio Globus is one of the largest tour operators in Russia, where the outbound tourism market has grown by 15% in volume, on average, in the last three years. The gross assets of Biblio Globus on completion are expected to be £40 million, and profit before tax in the twelve months to 30 September 2019 is expected to be £12 million.