TUI stock rises on strategic alliance with Oman government

Investing.com -- TUI AG stock gained 1% on Thursday following the announcement of a strategic alliance with the Omani government that includes a share issuance at a premium.

The German travel and tourism company is issuing 8 million shares at €9.50 per share to the Oman Tourism Development Company (OMRAN), representing a 20% premium to Wednesday’s closing price. The deal will give OMRAN a 1.4% stake in TUI.

TUI plans to invest the €74 million raised from the share issuance into a new joint venture in which it will hold a 45% stake. The joint venture, which includes OMRAN and another shareholder, will develop five hotels aimed at positioning Oman as a sun-and-beach destination for European holidaymakers.

OMRAN is a government-owned entity tasked with developing Oman’s tourism sector under the country’s Vision 2040 initiative. It currently stands as the largest hotel investment group in Oman, managing 29 assets and maintaining 8 strategic partnerships.

"We think the negative from a ~1% share issue is outweighed by the 20% share price premium and confidence shown in TUI by a sovereign fund becoming a new shareholder," Morgan Stanley analysts noted.

TUI is scheduled to release a trading update next week. The company’s strategy leverages its hotel brands and experience in developing vertically-integrated destination clusters, similar to its projects in Cape Verde and Zanzibar.

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