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Merger of Shearings and CHG February 2005
   

3i, Europe’s leading venture capital company, announces today that it has exchanged contracts on a deal which if completed would create one of Europe’s largest coach holiday companies.  The new group will be formed by the merger of Coach Holiday Group (CHG) and Shearings in a deal worth £200 million.  CHG is the parent company of leading brands in the holiday market including Wallace Arnold (WA), National Holidays and Caledonian Travel.

3i is an existing shareholder in CHG and following completion will hold 67.8% of the new group and management 32.2%, of which a proportion is intended for an employee share option scheme.  Prior to the merger an institutional syndicate led by Bridgepoint held a 61.5% majority stake in Shearings.  Completion of the deal is, amongst other things, subject to review by the office of Fair Trading.

The merger of Shearings and CHG will upon completion:

  • create one of Europe’s largest coach holiday companies for the growing , affluent over 55 age group with a combined annual passenger carrying of nearly 1 million, a database of over 2.5 million people and over 3,400 employees
  • create a dynamic new holiday company targeting the affluent and growing over 55 age group offering a combination of coach, air and hotel holidays to over 170 destinations throughout the UK and Europe
  • bring together two of the UK’s favourite coach and hotel holiday brands.  The highly complementary brands will offer customers greater choice by way of more holiday destinations in the UK and Europe and improved levels of service from coach pick up points, over 40 owned hotels with more than 2 million bed nights in the UK and a fleet of over 400 coaches
  • generate combined pro forma sales for 2004 of approximately £216 million and operating profits of £14 million giving the new group a 14% share of UK coach holidays, an industry worth £2.1 billion.  It will also provide the opportunity to unlock substantial cost synergies principally by saving on duplicated feeder route costs.

John Slatcher, Managing Director of Shearings, said:

“This will be a transforming step for both Shearings and CHG and we believe this merger presents an exciting opportunity for employees, customers, partners and shareholders.  The combination of the two businesses, with their strong brand awareness and discerning customer base, will significantly enhance our holiday offering providing customers with greater choice and convenience”

Ken Beaty, 3i Director, said:

“The merger of the Shearings and CHG businesses when it completes represents a very exciting move in the travel industry as it brings together two of the largest and best loved holiday companies for the over 55’s in the UK.  The clear financial and operational benefits, supported by a compelling strategic fit, will provide a strong platform for further growth.”

Bernard Norman, Chairman of CHG, said:

“The growth of the two companies to date has been the result of the commitment and loyalty shown by all employees.  The continued contribution from all our staff will be critical to the future success of the new group.  Therefore, we will not be planning large scale job losses, as is often the case with mergers, but ensuring that the vibrant and ambitious enlarged company will offer employees increased opportunities for further development”

CREATING A MAJOR FORCE IN HOLIDAY TRAVEL FOR THE OVER 55 AGE GROUP THROUGH THE UK AND EUROPE

Subject to the deal completing, the new group will be focused on providing customers in the over 55 age group with coach, hotel and self drive breaks in the UK and air and coach holidays in Europe.  Holiday would be sold using a multi-branded approach through its “WA Shearings”, “Grand Tourer”, “Caledonian Travel” and “National Holidays” brand visiting every popular holiday destination in the UK and Europe.

The WA and Shearings brands would be operated as a joint brand “WA Shearings” from Autumn 2005.  The new brand would offer customers greater choice of coach, air and self drive short stay hotel breaks in the UK and Europe.

WA Shearings’ hotels would continue to be promoted using the hotel name with the WA Shearings name underpinning customer reassurance.

Through partnerships WA Shearings would also offer long haul holidays to destinations including Canada, America, Australia and new Zealand.

The immediate priorities for the new group would be to successfully integrate the two businesses, drive the synergies between the two companies and to further improve levels of service.

Future profit growth would be driven by greater efficiencies created by the merger, rationalising the infrastructure and cost base and identifying selective acquisitions.  The increased scale of the business and combined customer database of 2.5 million would enable the new group to diversify its product range and offer customers greater choice and convenience.  Further developing air coach holidays to Europe and short stay self drive breaks in the UK would also form a key element of the growth strategy.

The market

On completion the new group would have a 14% share of the UK coach holidays.  The UK coach holiday industry is worth £2.1 billion and is less volatile than the wider holiday market.  There are 5.5 million inclusive coach holidays taken in the UK each year.  It is highly fragmented with over 600 operators, but with the top five holiday an 18% share.

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