Thomas Cook Acquired By Prem Watsa: A Case Study

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Thomas Cook India Ltd (BOM:500413) (NSE:THOMASCOOK) is India’s largest, fully integrated and highly profitable Foreign Exchange and Travel Operator having a current market cap of  ~INR 14 billion and FY12 revenue of ~ INR 4.3 billion.

Operating in India for the last 132  years with a robust business model. Since it went public 30 years ago, Thomas Cook India Ltd (BOM:500413) (NSE:THOMASCOOK) has never suffered a loss, never skipped a dividend and experienced a revenue decline in only 3 years.

Dominant share of more than 50% in India’s foreign  currency bank notes exchange business (gross business  volume of $1.8 billion in 2012).

India’s leading and rapidly growing, leisure outbound tour operator offering tour packages  for 50 countries to India’s  vast and increasingly prosperous middle class citizens who  are brand conscious and eager to explore the world despite significant depreciation in INR which makes foreign travel more expensive.

  • India’s leading MICE (Meetings, Incentives, Conferences and Events) player by sales
  • One of India’s largest corporate travel agents having more than 700 clients
  • One of India’s top three leisure inbound travel companies

Both the forex and the travel businesses have enduring competitive advantages and huge synergies which enable Thomas Cook India Ltd (BOM:500413) (NSE:THOMASCOOK) to deliver Free Cash Flow/Tangible Networth of more
than 24% a year

  • Thomas Cook India Ltd (BOM:500413) (NSE:THOMASCOOK)’s  revenueand  EBIT have grown at a CAGR of 16% and 14% respec(vely over last 10 years

Acquired by Canada’s Fairfax Financial Holdings Ltd (TSE:FFH)  (founded by legendary value investor Prem Watsa) from distressed British parent

  • Fairfax Financial Holdings Ltd (TSE:FFH) has a solid track record of  delivering a 22.7% CAGR  in book value and 19% CAGR in stock price  over last 27 year
  • Fairfax is an experienced acquirer of businesses (more than 25  acquisitions) and has delivered long term value to its shareholders through both organic and inorganic growth.
  • Fairfax paid 10 (mes free cash flow for a 75% stake  in TCIL  after adjusting for its undervalued real estate assets. Fairfax has started the  process of monetizing the real estate assets of TCIL
  • Prem Watsa sees a huge potential for TCIL and recently said: “You will understand the great growth potential of this company when you realize that currently only one million Indians annually travel outside India for holidays. This compares to some 40 million outbound tourists in China and hundreds of millions of outbound tourists in the western world.


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