Canada's Fairfax Financial Holdings Ltd, a property and casualty insurer run by Prem Watsa, yesterday agreed to buy debt-ridden travel services provider Thomas Cook Group Plc's 77 per cent stake in its Indian operations for about Rs817.4 crore ($150 million).

The Toronto, Ontartio-based company's unit Fairbridge Capital will pay Rs50 per share, representing an 18 per cent discount to Thomas Cook India's closing price of Rs61.05 on the National Stock Exchange yesterday.

Fairbridge Capital clinched the deal after outbidding private equity firms Kohlberg Kravis Roberts and T A Partners.

Under the terms of the deal, Fairbridge Capital will have the right to use the Thomas Cook brand name for twelve-and-a-half years in India and Mauritius.

"We are pleased to announce this acquisition and to own such a well-known and strong Indian business," Fairfax CEO, Watsa said in a statement.

Watsa added that Madhava Menon, Thomas Cook India's chief executive, would continue to lead the business.

Thomas Cook, Europe's largest tour operator and UK's second-largest foreign exchange group, had in February announced plans to sell its 77 per cent stake in Thomas Cook India in order to bring down debt, estimated to be around £900 million (See: Thomas Cook to sell stake in Indian unit).

Thomas Cook (India) is the country's oldest and largest travel and travel related financial services company, offering a broad spectrum of services that include foreign exchange, corporate travel, leisure travel, and insurance.

With over 60 per cent market share, Thomas Cook India is the only profitable unit within the group's global operations, having posted a profit of Rs47 crore on revenues of Rs310 crore in 2011.

The embattled London-based travel agency, which has a market capitalisation of approximately $6 billion, made three profit warnings last year amid weak demand for travel that triggered an 80 per cent decline in its share price.

Thomas Cook Group blamed the nearly £400-million loss in the first six months of 2011 to the floods in Thailand and the uprisings in Egypt and Tunisia.

The travel company reported pre-tax losses of £157.7 million in the three months to 31 December as against £99.3 million in the previous year.

The firm, which is estimated to have net debt of £900 million, arranged a £200-million revolving credit facility from banks and raised another £200 million by selling non-core assets.

In December 2011, the group sold its Spanish hotel chain for €72.2 million and agreed to sell surplus office property in Hoofddorp, The Netherlands, to FN2 BV, part of the Fotex Group (See:Thomas Cook sells Spanish hotel chain for €72.2 mn; to close 200 shops).

As expected, Thomas Cook Group late last year announced that it would close 200 of its travel agencies in the UK over the next two years, which will leave the world's oldest travel agency with about 1,100 high street travel offices across the UK.

It also plans to reduce its aircraft fleet by six planes as part of a massive overhaul of its UK operations.

With 2011 revenues of $6.1 billion and market capitalisation of $8.7 billion, Fairfax is a financial services holding company with interests in property and casualty insurance and investment management.

The company that employs over 8,200 globally, has recorded compounded growth rate of approximately 26 per cent in book value per share for over the last 22 years until fiscal year 2007.

Fairfax operates through 12 subsidiaries or joint ventures in Canada, the US, Singapore, Hong Kong and India.
Fairfax is led by Hyderabad-born chairman and CEO Prem Watsa who earned a chemical engineering degree from the Indian Institute of Technology Madras in 1971-1972.

He later changed his field entirely after moving to Canada in late 1972 and got a masters degree in business administration from the University of Western Ontario.

Watsa, who controls nearly half of Fairfax, has often been called the Warren Buffet of Canada for his skill in value-oriented investing strategies.

He is director and member of risk committee at ICICI Bank ltd and ICICI Lombard - a 74/26 per cent joint venture between ICICI Bank Limited and Fairfax Financial.