A Spanish consortium led by hotelier family Riu has bought 17.3 percent of tourism group TUI from German state bank WestLB, becoming TUI's biggest shareholder and ending fears of its break up. Riu, savings bank Caja de Ahorros del Mediterraneo (CAM) and hotel group Grupo de Empresas Matutes bought most of WestLB's 31.3 percent TUI stake, which WestLB sold on Wednesday for almost 1 billion euros ($1.3 billion).
The remaining 14 percent holding in TUI, Europe's largest tourism group, was sold by Deutsche Bank mainly to institutional investors in Europe for 16.5 euros a share on Wednesday, a Deutsche Bank investment banker said.
"It's a good solution, not the best, but a good solution. Now people are looking much more at fundamentals," said Union Investment fund manager Michael Gierse, whose funds own TUI stock. TUI's underlying performance is "great", he added.
TUI shares were down 3 percent at 16.25 euros at 1250 GMT, making them the worst performer on the German blue chip DAX index, which was up 0.5 percent.
TUI chief Michael Frenzel said the sale to the Spanish group was an excellent result. "This solution takes the uncertainty out of the markets, the company can concentrate entirely on the operating business again," he said.
Jan Kahmann, deputy chairman of TUI's supervisory board, said he expected TUI's corporate structure to remain unchanged.
TUI, which owns Britain's Thomson, had always wanted the Riu family, with which it already had links, to become its key shareholder to avoid a break-up when WestLB sold its stake.
Speculation had mounted earlier this year that TUI could be taken over and split up after its share price slumped amid concern about the tourism industry, threatening the company with an exit from the DAX blue chip share index.
Holiday bookings have improved in recent months, and Frenzel reiterated on Wednesday that the positive trend seen in the third quarter will continue.
"What happened today is very positive. Now these rumours are over, investors can focus again on the operating business. The recovery in tourism seems to be sustainable," said Martina Jung, an analyst at Metzler who rates TUI as "buy". "The company structure is not in danger at all," she added.
WestLB on Wednesday sold its stake to Deutsche Bank for about 950 million euros, or approximately 17 euros a share, a source familiar with the situation said. WestLB had valued the stake on its books at 16.5 euros a share.
Deutsche later sold the shares to the Spanish consortium and to other investors. The Spaniards bought the shares at a premium to TUI's closing share price of 16.75 euros on Tuesday, Deutsche said.
The Riu family will own about 10 percent of TUI after the deal, and said the move would strengthen its relationship with the company.
About 40 percent of TUI's business comes from customers travelling to Spain, and TUI already owns 50 percent of Riu's Riusa II and 49 percent of its Riu Hoteles SA hotel businesses.
Riu's stake in TUI will be held by the family and not by the joint companies, TUI said.
WestLB had wanted to dispose of its TUI stake to help boost its balance sheet as government guarantees that underpin the credit-worthiness of German state banks are phased out.
The sale, sources close to the bank said, would show the rating agencies that WestLB is quitting its traditional model of owning substantial industrial holdings.
WestLB had received interest from a number of parties for the stake in recent months. Other Spanish firms including Hotel company Lopesan and builder Satocan, both based in the Canary Islands, were both reported to be interested.