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Travel giant TUI to break up leisure and shipping units

Germany's TUI, the biggest European travel group, said on Monday that its supervisory board had decided to separate its Hapag Lloyd shipping unit from its travel and leisure activities.

Published: 17 March 2008 18:19 CET

Travel giant TUI to break up leisure and shipping units

Photo: DPA

TUI said it would examine all options for Hapag-Lloyd, including a spin-off, a merger with a peer or a sale to an investor, in what appeared to be a defeat for company boss Michael Frenzel. The shipping division posted €6.2 billion ($9.8 billion) in sales last year, according to preliminary figures released early this month.

“The interests of our shareholders, bondholders and employees are to be taken into account in an appropriate manner,” the company said in a statement.

At the same time, the board had asked TUI’s management to come up with “further growth options” for the tourism division, which posted €15.6 billion in sales, according to the preliminary figures. Further information was to be released on Tuesday at the company’s annual results press conference, TUI said.

The news spelled defeat for Frenzel, who had staunchly defended a two-pillar strategy for the group despite scepticism from analysts and some key shareholders. Calls had increased in the past week in favour of a break-up, in particular from Norwegian shareholder John Fredriksen.

US shareholder Guy Wyser-Pratte bought one percent of TUI in late September for €40 million and launched a campaign against Frenzel, who nonetheless saw his mandate renewed until 2012.

Stock market rumours have suggested renewed interest by the Singapore holding company Temasek for a merger of its container shipping unit Neptune Orient Lines, with Hapag Lloyd.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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