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Thomas Cook, Co-op Travel Deal Cleared

Thomas Cook & Co-operative Travel LogosThe merger between Thomas Cook and Co-op Travel has been given the go ahead. The newly merged group will include shops from both companies, including Midlands Co-op, for a total of more than 1,200 venues. Due to this, it will become the largest high street travel agent in Britain, as well as the country’s second biggest foreign exchange group.

The deal is able to be completed after the companies got a green light from the Competition Commission. The regulator ruled that customers aren’t likely to suffer higher priced holidays or have fewer choices if the merger goes ahead, despite the group’s strong position. It’s expected that the tie-up will be finalised just next month.

Thomas Cook will own 70% of the newly combined group, and Co-op Travel will own the rest. Thomas Cook has also vowed that the merger will save around £35 million a year, which is part of a strategy to boost the UK business’s competitiveness. Of the more than 1,240 shops, 780 are Thomas Cook’s, 360 are Co-op’s, and another 100 are owned by Midlands Co-op. It’s likely that some of these stores, however, will be closed when the merger is completed, which is expected to lead to staff cuts.

The green light for this merger comes at a good time for Thomas Cook, following three profit warnings this year already and the resignation of chief executive Manny Fontenla-Novoa a couple of weeks ago. Problems in Britain have been one of the reasons behind the travel agent’s disastrous previous year, which has seen share prices fall 70%. The company is conducting a strategic review of its UK business, looking at reducing the span and breadth of the product range they offer in the country, as well as cutting its aircraft fleet there by more than 10% in the next 18 months. The group is getting help from management consultant firm KPMG.

Fontenla-Novoa, who is being replaced by Scandinavian head Sam Weihagen, isn’t the only senior executive who is leaving Thomas Cook soon – a result of the poor performance it has reported in the UK. Head of retail Ian Derbyshire will be resigning after working with the group for 11 years. The group says the 43-year-old decided to leave earlier in the year to join the children’s activity business operated by his family. However, he has agreed to stay until the merger with Co-op Travel is completed, which won’t be much longer now. He will be replaced by the current online travel agency head, Simon Robinson.

As part of a removal of senior management at the debt-burdened tour operator’s British business in Britain, chairman Michael Beckett is planning his retirement in the next six months. Other directors, including two divisional heads, will be leaving the group as well.

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