Fairbridge buys Thomas Cook India for $150m
Thomas Cook has now sold its India business twice in the space of six years. The asset was first offloaded to Dubai Financial in 2005 as a package deal including licenses to operate the brand in the Middle East, as Thomas Cook divested non-core assets to focus on Europe. Two years later, the company performed an about-face and decided to expand in emerging markets. It bought back a controlling stake in Thomas Cook India plus the Middle East business.
Now the India business has changed hands once again, though not in circumstances the parent company would wish. As India's largest integrated foreign exchange and travel services operation, with an EBITDA of INR562 million ($10.1 million) in 2011, Thomas Cook India is a cash cow - but this also made it a prime asset for sale as the parent sought to reduce its GBP1.2 billion ($1.9 billion) debt burden.
Fairbridge Capital, a subsidiary of Canada's Fairfax Financial Holdings, emerged the victor from an intensely competitive bidding process, paying INR50 per share - or INR8.17 billion - for a 77% stake in the company. This represents an 11% premium to the stock's trading price when the auction was announced in February.
"We take a very long-term perspective on this investment because we are not required to sell within a certain period of time," Harsha Raghavan, head of Fairbridge, tells AVCJ. "We see this is as a platform for long-term value creation in India."
Fairfax Financial has approximately $34 billion on its balance sheet, which offers ample dry powder for Fairbridge's India investments. This is the first capital deployed since Raghavan joined the firm last summer. A former executive at Goldman Sachs and head of India for Candover, he set up his own operation, Steer Partners, in 2009, but struggled in a difficult fundraising environment. Fairfax Financial's past investments range from pulp and paper to children's toys, and Fairbridge has a similarly wide remit.
Securing the Thomas Cook India stake meant fighting off competition from various interested parties. KKR, The Carlyle Group, Everstone Capital, Actis, TA Associates all reportedly submitted bids, as did UK foreign exchange specialist Travelex and Chinese travel group HNA. Fairbridge plans to retain the existing management team, led by CEO Madhavan Menon.
AZB & Partners and Shearman & Sterling provided legal advice to Fairbridge, while PricewaterhouseCoopers and Pioneer Investcorp served as financial advisors.
As for Thomas Cook, it has given up a foothold in one of the world's fastest-growing tourism markets in order to buy time with its creditors. The company has also agreed to sell hotels in Spain and France, but these don't boast the history of Thomas Cook India, which started out selling passages to and from the UK to maharajas and nabobs in the late 19th century.
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