TUI AG Regulatory News (TUI)

TUI AG has reached an agreement today to contribute its 100% subsidiary Hapag-Lloyd Cruises into TUI Cruises, a 50:50 joint venture owned by TUI AG and Royal Caribbean Cruises, valuing it at €1.2bn on a debt and cash free basis, with an expected net cash consideration of approximately €700m (including an earn-out element of €63m, payable upon Hapag- Lloyd Cruises delivering its FY 2020 budget EBIT) (the 'Transaction'). The Transaction is expected to generate a considerable book gain and is still subject to customary closing conditions and certain regulatory approvals and is expected to complete in summer 2020.

With the Transaction, TUI and Royal Caribbean Cruises Ltd. have agreed to further expand their partnership by using the proven joint venture structure of TUI Cruises also for the luxury and expedition cruise segment. The partnership combines the shipbuilding, operational and digital expertise of Royal Caribbean and the strong brand and distribution power of TUI. The Transaction is in line with TUI's previously stated objective to deliver additional profitable growth at a lower level of capital intensity.

Hapag-Lloyd Cruises is part of the TUI Group's cruise businesses and is the leading provider of luxury and expedition cruises in German-speaking markets. Its fleet currently consists of two luxury ships within the five star plus category and three expedition cruise ships. A further expedition cruise ship has been ordered and will be added to Hapag-Lloyd Cruises' fleet in 2021 to replace Bremen. In light of the Transaction it is anticipated the luxury and expedition fleet will grow in the coming years, as it is expected that the demand for luxury and expedition cruises will continue to grow.

In the financial year ended 30 September 2019, Hapag-Lloyd Cruises generated a total revenue of €305m, an underlying EBITA of €43m and reported gross assets at 30 September 2019 of €660m. During 2019 Hapag-Lloyd took delivery of two industry leading expedition vessels, Hanseatic Nature (May 2019) and Hanseatic Inspiration (October 2019), setting the stage for growth. Excluding synergies, fiscal year 2020 is expected to deliver EBITDA of €90m. Going forward Hapag-Lloyd Cruises will be part of the TUI Cruises joint venture and further support the growth of TUI Group Cruises segment. As we continue with our announced accelerated strategic growth and digital transformation initiatives, we will use the proceeds according to TUI's Capital Allocation framework and to strengthen the Group's balance sheet.

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