Franchise owners look to buy out all of United Travel

Rolf Krecklenberg

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 individual 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.