TOURISM Holdings is going into a joint venture with coach operator InterCity Group as it looks to drive further rationalisation in the tourism sector and reduce its costs.
THL said yesterday that it would be selling its Fullers Bay of Islands leisure cruising business and Great Sights coach tour operation to InterCity. The deal, effective on December 1, will see THL gain a 49 per cent shareholding in InterCity and take out $16 million in cash.
THL chief executive Trevor Hall said the new combined InterCity company would be "a significantly more profitable vehicle than either of us operating individually. We are talking in the multimillions (of dollars)."
In conjunction with the deal, THL is also restructuring its internal operations, which will include duplication of services that occurs at the moment in some areas such as reservations. This will see job numbers reduced by 30 by next April. Mr Hall said he was confident the staff would be able to be placed in other jobs both within THL and in other tourism- related businesses.
InterCity operates the country's largest coach transport network, connecting to more than 600 destinations and with over 150 services a day. It also owns the Kings cruise and tour business in the far North.
InterCity is controlled by Masterton's Tranzit Group and Timaru's Ritchies Transport. Tranzit is owned by the Snelgrove family and Ritchies by the Ritchie family. Nelson bus operator SBL also has a small stake in InterCity. The current shareholders will collectively own 51 per cent of the new InterCity Group. The new company will have an enterprise value of about $70 million.
Current chief executive Malcolm Johns will continue to manage the business.
Forsyth Barr head of research Rob Mercer said the deal was an excellent outcome for THL. "This transaction again highlights the upside potential from divesting/merging (THL's) leisure group operations," he said. "THL gains the benefit of maintaining a financial interest in the operations while at the same time releasing some of the capital -- $16 million -- tied into this underperforming part of its group assets."
Tourism Holdings is involved in a broad range of tourism-related activities. It owns attractions such as the Waitomo Caves and Kelly Tarlton's and operates motorhome, campervan and rental car businesses.
The company has been looking to focus on the rentals business, the most profitable part of its operations. An attempt early this year to sell its tourism leisure group, which includes assets such as the Waitomo caves, led to a $277- million bid being made for the whole company by Australia's MFS Living & Leisure.
The bid narrowly failed to reach the required 90 per cent acceptance level, and lapsed in late July. Mr Hall and his team have looked for ways to streamline the business -- the company sold two thirds of its interest in Johnstons Coachlines. THL shares closed unchanged at $2.30.
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CAPTION: Bolting ahead: THL will pocket $16 million from the deal with InterCity.
