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Frankfurt: German retail and tourism group Arcandor will not to sell its stake in travel company Thomas Cook to secure financing and will launch a capital increase instead, it said on Monday.
Arcandor shares fell 3.7 per cent to 1.84 euros (Dh9.88) by 0916 GMT, and are now down around 90 per cent on the year.
"The decision was made not to sell shares of Thomas Cook Group," Arcandor said yesterday, after its supervisory board met on Sunday to discuss the company's future.
Arcandor holds around 52 per cent of Thomas Cook, the group's only profitable unit, which generates about 60 per cent of Arcandor's annual sales.
New bearer shares
The group has been under pressure since saying last Wednesday it was considering lowering its stake in Thomas Cook and its Karstadt department store unit in connection with a new refinancing deal with its banks.
Arcandor said yesterday it would issue 23 million new ordinary bearer shares from contingent capital and that subscription rights would not be offered to current shareholders.
At the current share price this would mean Arcandor would raise around 41 million euros ($59.98 million). Sebastian Hein, an analyst at Bankhaus Lampem, said the capital increase "is the best solution, because if they had sold Thomas Cook shares, they would have had to deconsolidate".
"Now they'll keep Thomas Cook as part of their strategy, which is positive in the long run."
Arcandor's net financial liabilities were 1.5 billion euros at the end of June, more than its market capitalisation of about 438 million euros.
Thomas Cook, Europe's second-biggest travel company after TUI Travel, welcomed the news.
"The whole board is very pleased that Arcandor are retaining their shares in us. They've been incredibly supportive of our business and we've done very well under the current shareholder structure," Chief Executive Manny Fontenla-Novoa told reporters in London.
Arcandor said it had made no decision on Karstadt, which operates department and sports stores.
Karstadt's losses wid-ened in the third quarter due to sluggish consumer spending in Germany, forcing Arcandor to lower its 2008/09 outlook.
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