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Banking industry

WestLB AG Resists Pressure to Sell TUI AG Stake at Undervalued Price

Strategic Insights

— 2 min read

Dusseldorf-based investment bank WestLB AG is in no hurry to sell its 31% stake in Europe's largest travel group, TUI AG, despite reports of interest from U.S. private equity firms. The bank values the stake at book value and will not part with it for less, a source said. WestLB has marked down the value of its stake to €16.50 a share, valuing the company at €2.94 billion, but the price has slumped since then to a low of €12.87 last month before climbing again to more than €15 in afternoon trading. TUI AG has faced pressure since the slump in the tourist industry after September 11, 2001, and is at risk of falling out of the DAX index of Germany's top 30 stocks unless it sustains its recent performance.

Key Takeaways:

  • WestLB AG is not under pressure to sell its 31% stake in TUI AG at any price and will only do so at book value.
  • The bank marked down the value of its stake to €16.50 a share, valuing the company at €2.94 billion, but has seen the price slump since then.
  • TUI AG has been under pressure since the slump in the tourist industry after September 11, 2001, and is at risk of falling out of the DAX index of Germany's top 30 stocks.
  • U.S. private equity firms, including Cerberus Capital Management LP, Fortress Investment Group LLC, and Lone Star Funds, have been circling TUI AG, sending the company's share price up.
  • TUI AG has reported a €36 million loss for the first half, due to the seasonal nature of the business, but made a €113 million profit in the second quarter and expects its second-half results to be better.
  • WestLB AG made a €209 million first-half pretax profit, compared with a loss of €347 million in the same period in 2003, and expects a full-year pretax profit of €357 million.

Statistics:

  • WestLB AG's stake in TUI AG is valued at €16.50 a share, valuing the company at €2.94 billion.
  • TUI AG's share price has climbed to more than €15 in afternoon trading, its highest level since the first week of July.
  • TUI AG made a €113 million profit in the second quarter, despite a €36 million loss for the first half.
  • WestLB AG made a €209 million first-half pretax profit, compared with a loss of €347 million in the same period in 2003.
  • TUI AG's market capitalization is almost €2.7 billion ($3.3 billion).

Sources:

  • TheDeal.com
  • WestLB AG
  • TUI AG
  • Cerberus Capital Management LP
  • Fortress Investment Group LLC
  • Lone Star Funds

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