EC to probe Airtours' bid for First Choice

AIRTOURS' PROPOSED pounds 852m hostile takeover of First Choice Holidays was dealt a severe blow yesterday when the European Commission announced it would start an in-depth four-month investigation into the implications of the bid.

The Commission said its investigation would focus on whether the deal would give the major tour operators a dominant position in the UK holiday market that could be used to affect prices and reduce the ability of smaller companies to compete effectively. The commission expressed particular concern about the effect on the package holiday market in Ireland.

Airtours said it was "surprised and disappointed" by the decision. But the Airtours bid will not lapse for 21 days because it announced, 30 minutes before the EU decision, that its offer had gone unconditional regarding acceptances from 51 per cent of First Choice shareholders. The firm has that time to decide whether or not to press ahead with its bid in the face of the EU inquiry or allow the offer to lapse.

First Choice urged its shareholders to take no action regarding either the Airtours offer or its own plans for a pounds 1.5bn merger with Kuoni of Switzerland.

If, in three weeks Airtours has decided to let its bid lapse, First Choice will lobby shareholders to back the merger with Kuoni. The choice, it says, is between the certainty of the Kuoni merger, which already has competition clearance, and the risk of the superior Airtours terms falling foul of the regulators. "It is a case of a bird in the hand being worth two in the bush," claimed Ian Clubb, First Choice's chairman.