In a move that hardly came as a surprise to many in Canada’s travel industry – it was just a matter of when and to whom – Thomas Cook Group plc has sold off Thomas Cook North America.
The buyer is the Canadian online company Red Label Vacations, "with participation from members of the Thomas Cook North America senior management team, led by Dean Moore, CEO," according to a statement from Thomas Cook. The purchase price is $5.2 million (C$5.3 million).
Privately owned, Red Label Vacations operates as RedTag.ca, an online travel portal and major player in the Canadian travel market. The company is based in Mississauga, Ontario..
The sale encompasses Thomas Cook Canada Inc. and Thomas Cook USA Holdings Inc. It includes Sunquest Vacations and a distribution network in Canada and in the U.S. ABC Corporate Services and D-FW Travel Arrangements Inc.
The transaction is expected to be completed by May 31. However it is subject to several conditions, including clearance by the Competition Bureau of Canada, the release of guarantees provided by Thomas Cook Group plc to third parties on behalf of Thomas Cook North America (TCNA) and the release of guarantees provided by TCNA in support of the group’s financing arrangements.
Cutbacks and losses
The news follows an earlier announcement by the Thomas Cook Group that it would cut its British and Irish workforce by 2,500 people – out of a workforce of 15,500 – and close 195 of its 1,069 offices in Great Britain and Ireland.
On this side of the Atlantic, Thomas Cook North America recorded a loss, before taxes, of $131 million for the fiscal year ending Sept. 30, 2012. The company had gross assets of $257 million.
“Together with our partners at Red Tag, who offer a very different approach and valuable skill set to our organization, I believe we are perfectly positioned as we continue to execute our turnaround plan," Moore said in a statement.
"This plan is already well advanced and yielding extremely positive results and this transaction provides the opportunity to continue with a significantly enhanced management capability.”
In announcing the sale, Harriet Green, chief executive of Thomas Cook Group plc said, “As we continue to drive the transformation of the Thomas Cook Group, I am pleased to have reached agreement to divest our North American business, enabling us to focus on our core segments and future growth. The combination of TCNA’s product portfolio and Red Tag’s online presence form an attractive proposition for Canadian customers.”
Implications of the sale
Ron Pradinuk, president of Renaissance Travel in Winnipeg, Manitoba, commented that what the sale “really mean[s] here is that a travel agency company is buying a tour operator. We see Red Tag more as a marketer of vacation packages.”
He characterized Red Tag as an online agency that advertises across Canada. “They’re very aggressive. They work very closely in sponsorships with some of our major tour operators. They are huge sellers of vacation packages.
“In addition, the logical conclusion is that every Thomas Cook agency will have a new brand – Red Tag – and they will establish themselves across the country in a brick and mortar chain.”
The direction Red Label Vacations intends to take with its new businesses, as well as whether it will assume any debt with the purchase, was unclear at presstime. Neither Enzo Demarinis, president of Red Label or Eric J. Altschul, senior vice president, distribution of Thomas Cook North America were available for comment.