Tourism Holdings’ $69.5m merger with rivals is ‘compelling’, adviser says

BusinessDesk report by Paul McBeth
The $69.5m merger of Auckland-based Tourism Holdings with rivals United Campervans and KEA Campers offers “compelling” opportunities to cut costs, according to the independent adviser’s report.

The rental campervan operator’s board unanimously recommends shareholders sign off on the deal to grow its market share in a cash-and-scrip offer after independent advisers Cameron Partners declared the transaction could potentially add “material value” for both Tourism Holdings investors and the United and KEA sellers. The deal will lift Tourism Holdings’ market share of the rental caravan market to 45 percent from its current 27 percent.

“We consider the strategic rationale for the transaction to be strong and the fleet rationalisation and synergy benefits to be achievable,” the report said. “The strategic rationale to reduce over-sector capacity and to achieve potential cost synergies is compelling.”

The company has been looking at ways to squeeze more from the market as international visitor numbers from Europe and the UK decline amid the global economic downturn, and as the New Zealand dollar’s strength persist.

The shares fell 1.4 percent to 71 cents today, and have rallied 25 percent since the merger was announced earlier this month.

Tourism Holdings chairman Keith Smith said the company needs to cut costs and reduce fleet capacity in an “effective and timely manner” and that the discount on the targets doesn’t often arise.

“Whilst the board remains confident in the long-term outlook for tourism, it recognises that there is little change of increasing tourist numbers to New Zealand from the core European and United Kingdom markets over the coming two years,” Smith said.

The transaction if forecast to lift annual revenue to $241.3 million in 2014 from this year’s $200 million, with profit rising to $14.8 million from this year’s $4.5 million.

The deal needs 50 percent approval to get over the line, and shareholders will vote on the transaction at a special meeting in Auckland on Oct. 19.


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