* TUI had classed Hotelbeds as non-core business
* TUI to invest proceeds in company
* Market for online hotel bookings very fragmented
* Cinven, CPPIB beat out EQT to deal
(Adds detail on investors, company)
By Victoria Bryan and Freya Berry
BERLIN/LONDON, April 28 (Reuters) - European tourism group
TUI TUIT.L is selling its Hotelbeds unit to private equity
group Cinven CINV.UL and Canada Pension Plan Investment Board
(CPPIB) in a deal worth 1.165 billion euros ($1.32 billion), the
companies said on Thursday.
TUI put its Hotelbeds unit, which sells hotels rooms to
wholesale customers such as travel agencies and tour operators,
up for sale because it did not fit with its other tour
operating, cruise and hotel businesses.
Hotelbeds is the largest business globally of its kind with
a market share of six percent. Headquartered in Palma de
Mallorca, it reported turnover of 1.06 billion euros and
underlying EBITA of 69 million in the year to end September
2015.
Cinven and CPPIB will back the existing management team and
share governance of the business equally, said Shane Feeney,
Head of Direct Private Equity at CPPIB, adding that he expected
to use Hotelbeds as a platform for future purchases.
"We will be opportunistic with acquisitions," Feeney told
Reuters.
The sale comes two months after private equity firm EQT took
Swiss travel firm Kuoni private for 1.35 billion Swiss francs
($1.39 billion).
Sources familiar with the process had previously said that
EQT was interested in buying Hotelbeds to go with its Kuoni
purchase.
The proceeds will be used to invest in further growth and
strengthen TUI's balance sheet, TUI said, adding the transaction
is expected to complete by the end of September.
TUI will likely invest in its hotel operating business and
in attracting more business from Chinese customers, CEO Fritz
Joussen was quoted as saying in an interview with German
magazine WirtschaftsWoche on Thursday.
CPP and Cinven will look to expand the company's hotel base
in the Middle East, Asia and the Americas and to invest in its
technology.
"We're going to be focused heavily on building out that
Asian growth, where travel growth is really booming," said Chris
Good, Senior Principal at Cinven. "There are plenty of
opportunities to expand outside bed banks, into rental cars and
ticketing as well."
Cinven has experience in the travel industry having owned
booking platform Amadeus AMA.MC from 2005 to 2011.
London-listed TUI is due to give a half-year trading update
on May 11. The company was advised on the deal by Deutsche Bank (DE:DBKGn)
and BofA Merrill Lynch. Financial advisors to CPP and Cinven
were Lazard, Morgan Stanley (NYSE:MS) and HSBC.
($1 = 0.8823 euros)
($1 = 0.9684 Swiss francs)