Franchise owners look to buy out all of United Travel

The half-share in the franchise company has changed hands five times in the past eight years.

The New Zealand Herald
February 12, 2008

Franchise owners look to buy out all of United Travel
Tamsyn Parker

The company representing United Travel's 97 franchise owners says it is considering a buy-out of the travel agency after negative fallout from its association with financially troubled Australian firm MFS, owner of the Stella Group.

The board of United Travel Holdings, which jointly owns the franchise company and United brand with Stella, says it is in discussions with Stella over the management structure.

MFS reached an agreement last week to sell 65 per cent of the Stella business to private equity group CVC Asia Pacific in a bid to raise cash.

Trading in MFS shares on the Australian stock exchange has been suspended since January 21 following a 69 per cent drop in its share price in one day on the back of investor concern over debt.

Last week MFS New Zealand, which is 38.5 per cent owned by MFS, also told debenture holders in its subsidiary, MFS Pacific Finance, that it could not make payments for January because the Australian company could not meet the financial commitment.

MFS NZ has been in a trading halt since January 31.

United Travel Holdings chairman Craig Corbett said it had been disturbing to be so closely linked to the woes of MFS even though the business is run as a standalone company.

"For us it has been business as usual. But the public perspective has been affecting our ability to do business," he said.

United is connected to MFS through Stella's half ownership of its franchise company and via Stella's wholly owned travel wholesaler Gullivers, through which United has arrangements to sell products.

While the exposure is small, the board took steps to protect its customers last week by setting up a holding account to ensure there was no risk to client's money from MFS.

Corbett said the agreement with CVC provided some reassurances, but it planned to keep the account open for the next couple of months until the deal was done and it was more certain about CVC's plans.

Corbett said the board was also having ongoing discussions with Stella about its ownership structure and what more could be done to protect the individu1al franchise owners.

He said a buy-out of the franchisor company was one option the board was considering.

The United Travel brand has been operating in New Zealand in its current form for around 35 years, but the last eight years has seen the half-share in its franchise management company pass from one player to another.

In 2000 it was sold by privately owned New Zealand company Passport United Travel to Gullivers Travel Group, which then listed on the New Zealand stock exchange in 2005, only to be bought out 18 months later by Australian tourism company S8.

Soon afterwards S8 was bought by the Stella Group.

"We have gone from being run like a close family business into a New Zealand corporate and now into the Australian corporate arena," said Corbett.

He said the board hoped to have talks with Stella over the next month to resolve its issues.

Meanwhile, Stella managing director Rolf Krecklenberg has said CVC isn't looking to on-sell the business or sell off parts of it in the near future, despite market rumours.

"No one goes into a business worrying about their exit strategy when they haven't written the cheque yet," he told the Herald on a visit to New Zealand aimed at reassuring local stakeholders.

Rather than splitting up the business, he said plans were to consolidate its position in New Zealand and Australia and look to growth prospects in the new parts of the business in the United Kingdom.

Krecklenberg played down the likelihood of CVC selling the business or floating it in the short term and said CVC had an average investment timeframe of around six years.

Krecklenberg, who will stay on as managing director and step down from the MFS board once the deal is done, said the company wanted to distance itself from the negativity surrounding MFS and move on with its business.

"We don't want to damage the reputation of Stella any further. We don't deserve any association with the negative publicity of MFS."

The new board of Stella would be made up of Krecklenberg, three CVC directors and one MFS director.

Stella is the first travel business that CVC has bought, and Krecklenberg said he saw that as a good thing.

"We know there is no desire to make the business conform to any of its other businesses."

Stella in New Zealand will have a new boss from March, when Stephen Humphries takes over from current head Phillip Turner, who is returning to Australia.

Krecklenberg said there would be no difference to customers, and for most of those directly involved in the company it would also be business as usual.

Stella Group has 1127 staff in New Zealand across 167 businesses which are mainly owned through franchise systems.


  • A majority stake in Stella was sold last week by MFS to CVC Asia Pacific for A$409 million.
  • Stella jointly owns the United Travel brand and franchisor company.
  • The other half of the franchise company is owned by United Travel Holdings - a holding company owned by the franchisees of the individual United Travel shops.
  • United Travel Holdings is considering buying out Stella's half of the business.
  • The half-share in the franchise company has changed hands five times in the past eight years.

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