US group eyes 30% stake in Airtours

SIMON PINCOMBE

Carnival Corporation, the world's largest cruise ship operator, is in talks with Airtours over a co-operation deal that could lead to the US tour operator buying a near-30 per cent stake in the Manchester-based package tour and holiday company.

Airtours shares - already up 36 per cent on bid speculation over the past two months - jumped a further 33p to 433p yesterday, eventually forcing an announcement from the company. Airtours said the talks "might lead to Carnival taking a stake of less than 30 per cent in Airtours through a subscription for new shares and a partial offer to all shareholders''. At yesterday's price a 30 per cent stake would be worth approximately pounds 151m.

Airtours' directors were not available for comment yesterday. But Michael Arison, chairman of Carnival, said he did not expect the acquisition to dilute the group's earnings per share. However, he could give no assurance that any agreement would be reached.

Carnival, based in Miami, Florida, operates the Holland America line as well as Windstar Cruises and about 19 cruise ships that sail to Alaska, the Caribbean, the South Pacific and the Mediterranean. It has said several times that it wants to enter the European market but its last attempt failed when a partnership with Greece's Empiotiki cruise lines was terminated last April.

Airtours - which retails holidays through its 701 Going Places outlets as well as running its own charter airline - has been keen to expand outside the traditional European destinations.

It offers tours to Sweden through its Scandinavian Leisure Group and is reported to be negotiating to buy the Danish operator Spies. In 1994 it bought Sunquest Vacations in Canada, which rivals claim has been reasonably successful.

But it is Airtours' highly successful move into sea cruising - it owns two cruise ships working the Mediterranean - which is thought to have attracted Carnival's interest.

Any deal between the two companies will in reality be thrashed out between the respective chairmen who each hold large blocks of shares in their companies. David Crossland, Airtours' chairman, accounts for nearly 27 per cent of the share capital, with the board in total speaking for 33 per cent.

Michael Arison, the Carnival chairman, has 10 per cent of the cruise group. The two are reported to be similar personalities who might be able to work together.

City analysts said yesterday it was impossible to take a sensible view of the announcement until the details of the prospective deal were published. "The offer to existing shareholders could form a disguised rights issue,'' one analyst said. While useful to fund further acquisitions, Airtours does not need the money. It has approximately pounds 80m of debt against a market capitalisation of pounds 450m.

Yesterday's announcement comes a month after Airtours reported its first profits decline in eight years. Along with the other UK travel operators Airtours had a bleak year in 1995, a victim of the hot weather and a past policy of chasing market share by slashing prices. Profits fell 22 per cent to pounds 59m after a profits warning in August, with profit per customer crashing from pounds 19.85 to just pounds 9.37. The company had been expected to lift profits from pounds 72m to pounds 85m.

Airtours faces a critical three months in the post-Christmas booking period. It has cut capacity for next summer by 14 per cent to 1.8 million. Bookings to date, however, are very slow.

The shares closed yesterday at 433p, up 33p on the day.

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