Russia’s Intourist group of companies and Europe’s second-largest tour operator Thomas Cook have agreed to establish a joint venture for Intourist’s tourism and retail businesses.
Thomas Cook got a 50.1 percent stake in the newly established venture, which is worth a total of $45 million. $10 million are going to be paid in cash and $35 million – in Thomas Cook shares. Talks to that effect had been under way for three years. The British side sought a full takeover, while Intourist’s parent company JSFC Sistema insisted on the sale of a minority equity interest to Thomas Cook. Intourist has retained its 49.9 percent equity and TC has a right to the subsequent buy-out of this remaining share.
This is what Thomas Cook CEO Manny Fontenla-Novoa had to say on the issue:
“”Such enthusiasm of a foreign company is mainly brought about by the utmost attractiveness of Russia’s tourism market, Executive Director at the Russian Tour Operators Association Maia Lomidze pointed out.
“It is quite natural that prominent global players acquire various market participants in different countries, regardless of how long the business at large has existed there. Thomas Cook is not going to overtake Intourist, but intends to set up a joint venture with both sides holding equal shares. Intourist will remain a brand. Moreover, the Russian market’s huge potential has always generated interest among international players”, Maia Lomidze said.
Foreign media consider the bargain to be a sort of a shock for the Russian market, as testified to by a headline in the Financial Times that reads “Stalin-era tour operator comes in from the cold”. And here is what the Press Association writes: “Thomas Cook has broken into the fast-growing Russian market by unveiling a joint venture with one of the country’s oldest travel agencies.”
Although apparently promising, the appearance of a British player in the market will hardly change the situation dramatically, Maia Lomidze goes on to say.
“The appearance of any significant player with its own time-tested practices and brand new principles of operation is rather encouraging for the Russian tourism business. The market’s response and associated changes, such as growing competition and service quality improvements, will follow only two or three years later,” Maia Lomidze said in conclusion.
Some experts believe that Intourist clinched the deal with a single purpose – to boost domestic tourism with all its weak points. The Russian travel group’s top priorities here are new technologies, not investments, while Thomas Cook’s interest in the joint venture is limited to Intourist’s 80-plus year history and influential brand name.