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UPDATE 2-TUI to sell specialist holiday business in mass market drive

Published 2016-05-11, 06:01 a/m
© Reuters.  UPDATE 2-TUI to sell specialist holiday business in mass market drive
TUI1n
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TRZ
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* Proceeds to be used for future growth, balance sheet
* On track for full-year earnings growth target
* Shares drop 2.3 pct

(Adds CEO comment, analyst comment, share price)
By Sarah Young and Victoria Bryan
LONDON/FRANKFURT, May 11 (Reuters) - European travel group
TUI TUIT.L is to sell its specialist adventure and education
holiday brands to focus on its main mass market tourism business
and plans to use proceeds from disposals for future growth.
TUI said on Wednesday that the specialist brands did not fit
with its main holiday and cruise group, which in its 2014-15
financial year accounted for almost 85 percent of revenues.
This follows the sale last month of TUI's Hotelbeds business
for around 1.2 billion euros ($1.4 billion).
These M&A deals are the latest step by TUI management to
reshape the tourism group which was created in 2014 by the
merger of London-listed TUI Travel and German majority owner TUI
AG. TUI also owns a little more than 12 percent of shipping
group Hapag-Lloyd, which it plans to sell, although it has said
is under no time pressure to do so.
The company's shares fell 2.3 percent, which analysts said
was in response to TUI's plan to keep hold of disposal proceeds.
"There was no mention of return of cash to shareholders so I
think if anything that is probably the disappointment," Cenkos
analyst Simon French said.
Selling the specialist group, which comprises more than 50
brands and had sales of 1.8 billion euros last year, would be
the best way to maximise value for TUI's shareholders, the
company said.
As with the Hotelbeds disposal, the company said it planned
to use the proceeds to invest in future growth opportunities and
strengthen its balance sheet.
Chief Executive Fritz Joussen defended the company's plan.
"Our aim is to grow, and growing earnings by 10 percent a
year is not possible unless you invest," Joussen told reporters
after the group reported first-half results showing first-half
profit up 16 percent.
TUI also confirmed it was on track for underlying earnings
growth of at least ten percent in its current financial year.
Bookings for the summer were 1 percent ahead of last year
and demand for holidays was strong, it said. That contrasted
with warnings from airlines that attacks in Paris in November
and in Brussels in March has hit demand for flights.

But TUI said customers continued to shift away from Turkey
to other destinations due to security concerns,
Separately, the group said it would expand its main holiday
and cruise group in France through a deal to buy Canada-owned
Transat's TRZ.TO French tour operating unit for 55 million
euros.
The deal will make TUI a market-leader in France's tour
operator industry and add new long-haul destinations, TUI said.

($1 = 0.8777 euros)

(editing by Elaine Hardcastle and Jane Merriman)

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