Cox & Kings, one of India's oldest travel company will buy the UK-based adventure travel firm Holidybreak, for £312 million (Rs2,250 crore/$511.3 million) in cash, to expand into the growing demand for education travels (See: Cox & Kings in talks to acquire UK's adventure travel firm Holidaybreak).

Founded in 1973 by Alan Goulding as Eurocamp Travel Limited, Holidaybreak was a family-run business offering camping holidays in Brittany, France. The business was sold in 1981 to London-based retail group, Combined English Stores.

Eurocamp plc was floated on the London Stock Exchange in 1991 and following the 1995 merger with Superbreak, the company changed its name to Holidaybreak in 1998.

Under the deal, the Mumbai-based Cox & Kings will assume Holidybreak's Rs1,490 crore debt, taking the deal size to Rs3,740 crore. Cox & Kings has offered 432.1 pence in cash, a premium of 35.5 per cent to the closing price of 319 pence per Holidaybreak share on 22 July, the last business day prior to the commencement of the offer period.

The offer also represents a premium of 54.2 per cent to the average closing price of approximately 280.3 pence per Holidaybreak share for the 3-month period up to 22 July.       
Holidaybreak Shareholders will also receive the previously announced 3.35 pence interim dividend in cash.

Cox & Kings has received approval from 31.76 per cent of Holidaybreak's shareholders, which includes the company's directors and intuitional investors. 

London Stock Exchange-listed Holidaybreak, is an education and activity travel group that provides educational and activity trips for school children as well as adventure holidays globally, short breaks in the UK and Europe, and mobile-home and camping holidays on sites throughout Europe.

The group operates through three divisions - education and adventure, hotel breaks, and camping, which have more than 15 widely recognised brands and hold leading positions in the UK and other major European markets.

Its education and adventure division provides residential, outdoor educational school trips through the UK market-leading PGL brand, as well as its NST, EST brands. This segment also has the German-based student and school tour accommodation group's Meininger brands, where it acquired a 50-per cent stake in 2010 for £31 million, and also provides worldwide adventure tours through its Explore and Djoser brands.

Its Hotel Breaks division provides domestic and overseas short-break holidays primarily for UK and Dutch consumers under brands that include Superbreak in the UK and Bookit in the Netherlands.

Its camping holidays are self-catering camps that are catered from mobile-homes and tents, pre-sited on third party owned camp-sites, through the Eurocamp and Keycamp brands across France, Italy and seven other European countries.

For the year ended 30 September 2010, Holidaybreak reported profit before tax of £26 million on revenues of £461.7 million. The Northwich, Cheshire-based company had net debt of £137.9 million and a defined benefit pension deficit of £1.2 million.

But in line with other European travel firms, Holidaybreak posted a wider first-half pretax loss in May as consumers reigned in spending coupled with a harsh winter.

The company reported a £19.2 million pre-tax loss for the six months to 31 March, compared with £17.7 million loss the previous year.

Cox & Kings, which is sitting on an Rs1,100 crore cash pile that has been earmarked for acquisitions, will transact the deal through its wholly-owned subsidiary Prometheon Holdings (UK) and fund the acquisition with a third by way of equity and the remaining two third by debt from Axis Bank.

Among the eight acquisition made by Cox & Kings in the recent past, which includes Australian firms Tempo Holidays, MyPlanet Australia Pty Ltd and Bentours International Pty Ltd, US-based outbound travel operator East India Travel in 2009, the proposed purchase of Holidaybreak is so far its biggest and appears to be the most significant acquisition.

It had also acquired UK-based ground handling firm ETN in 2006 and Quoprro Global Services, a visa processing firm in 2008 and has made investments in other international travel companies like Portman Travel of UK and Travel Transport and RADIUS in the US.

With an eye on Indian outbound travel market, which is expected to expand to $35-$40 billion over the next five years from the current $12 billion, the company is looking at small global buys to consolidate its position in the international market by planning to enter newer markets and geographies through acquisitions that would help it expand its portfolio.

The company's board, in April 2011 approved plans to raise up to Rs1,500 crore through issue of fresh shares or other instruments and also approved increasing borrowing limit to Rs1,500 crore from the current Rs1,000 crore

Its Indian operations contributed 48 per cent of its Rs500 core revenue in 2011, while its operations in the UK, Australia, Japan, Dubai and others contribute the rest with the leisure travel segment contributing more than 90 per cent and corporate travel around 4 per cent.

Educational tourism is taking off in India and Cox & Kings stands to benefit greatly since Indians take to overseas travel during March-June period-which is a lean season in Europe, while travel in Europe peaks during the July-September period.

So while Cox & Kings has a low revenue inflow during its dull period, the business cycle takes off for Holidaybreak, thus ensuring running cash flow for most of the year.

Cox & Kings, which is 58 per cent owned by the promoters and the remaining by foreign institutional investors, non-resident Indians, banks, mutual funds, corporates and public, envisages the acquisition becoming accretive from day one as Holidaybreak generates free cash after capex and it averages a profit before tax of around £30 to £35 million each year.

Peter Kerkar, director of Cox & Kings, said, ''We have been growing rapidly and have also significantly expanded our outbound tours operation from India and Oceania. Holidaybreak adds new product areas and markets which provide us with attractive opportunities to leverage Cox and Kings' global network and accelerate the development of both Holidaybreak and Cox & Kings' businesses.''

''I am proud of the significant progress we have made towards our objective of transforming Holidaybreak into an education focused business, both through expansion into the pan-European education market through the acquisition of Meininger…... it also presents an exciting opportunity for Holidaybreak's customers and employees to benefit from being part of an international travel company which shares our passion for delivering unique and valued products to our customers,'' said Martin Davies, group chief executive of Holidaybreak.

Both companies expect the deal to be completed before 27 September 2011.