AD-HOC ANNOUNCEMENT ACCORDING TO SECTION 15 OF THE GERMAN SECURITIES TRADING ACT (WPHG)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND THERE CAN BE NO CERTAINTY THAT AN OFFER WILL BE MADE OR AS TO THE TERMS OF ANY OFFER

27 June 2014

For Immediate Release

TUI Travel plc ("TUI Travel") and TUI AG

Statement regarding proposed merger of TUI Travel and TUI AG
The Independent Directors of TUI Travel and the Executive Board (Vorstand)
of TUI AG are pleased to announce that they have reached an agreement in
principle on the key terms of a possible all-share nil-premium merger of
TUI Travel and TUI AG (the "Merger"). The Merger, if consummated, is
anticipated to deliver a number of strategic and financial benefits for
both the TUI Travel shareholders and TUI AG shareholders.

Strategic Highlights

* Creation of the world's number one integrated leisure tourism business
* Continuation of existing strong leadership
* Significant synergies through combining the two businesses o Potential cost savings of at least EUR45 million (£36 million) per annum,in addition to certain cash tax benefitso Top line growth expected to be enhanced by broadening the portfolio ofunique holiday experiences, increased occupancy levels in existing hotels,the future expansion of TUI AG's core hotel and cruise activities andintegrated yield management* Simplification of the current group structure to unlock further valuewithin the businesses of the combined TUI AG and TUI Travel group (the"Group")* Acceleration in the growth of the Core Mainstream Tourism Businesso An enhanced growth profile from a broadened content portfolio andincreased investment in digital platforms to drive accelerated growth incustomer numbers* Non-core businesses will be run separately and maximised for value o The current Online Accommodation businesses and Specialist and Activitysector of TUI Travel will operate separately from the core tourism businessand opportunities to maximise their value for the Group will be activelypursuedo Hapag-Lloyd stake to be held for disposal Key Terms* Under the terms discussed between the parties, TUI Travel shareholders(other than TUI AG and certain connected parties) would receive 0.399 newTUI AG shares for each TUI Travel share that they own* German domiciled Group with a premium listing on the London StockExchange with an intention to seek inclusion in the FTSE UK Index Series(including FTSE 100), in parallel to a quotation on a German stock exchange* Intention to adhere to both the UK Corporate Governance Code and theGerman Corporate Governance Code to the extent practicable. The Group isexpected to be subject to the shared jurisdiction of the UK Takeover Codeand applicable German takeover law* TUI AG and TUI Travel expect that any dividends paid for the 2013/2014financial year would ensure equivalent payment to TUI AG and TUI Travelshareholders, taking into account the exchange ratio and would be in linewith the current TUI Travel dividend policy* The Group intends to review its future dividend policy followingcompletion of the Merger and in light of its expected profits and free cashflow generation, targeting a level which is in line with TUI Travel'scurrent dividend policyMr. Alexey Mordashov, the largest shareholder in TUI AG, has indicated hissupport for the Merger.Discussions remain ongoing and there can be no certainty that an offer willbe made or as to the terms of any offer.Media CallsThere will be a call for UK and Germany media at 1500hrs (BST), 1600hrs(CEST) today.The UK media dial in details are:Telephone number: +44 203 147 4862(from Germany: +49 30 232 531 366)The German media dial in details are:Telephone number: +49 30 8687 1410Analyst and Investor Webcast A live webcast presentation for analysts and investors will start today at1530hrs (BST), 1630hrs (CEST). To access the webcast, please go towww.tuitravelplc.com or www.tui-group.com for more details. Thepresentation will be available to download from both websites shortlybefore the webcast is due to start. It will also be possible to listen tothe presentation via telephone.The webcast dial in details are:UK: +44 203 367 9216Germany: +49 69 9418 4017France: +33 17 225 3098US: +1 408 916 9838Analyst and Investor Briefing A briefing for analysts and investors will be held on Monday, 30 June, at0930hrs (BST) at the London Stock Exchange, 10 Paternoster Square, London,EC4M 7LS.Strategic Rationale: Creation of the World's Number One Integrated LeisureTourism BusinessIf the Merger is consummated, it would bring together the content portfolioof hotels and cruise ships of TUI AG with access to customers through thedistribution capability and unique holiday concepts of TUI Travel. It wouldcreate a pure play integrated leisure travel Group that is a global leader,capable of delivering a complete end-to-end customer experience, therebysignificantly enhancing the Group's growth opportunities and capability fordelivering material financial benefits.TUI AG owns the most recognised travel brand in Europe. With over 230hotels and more than 155,000 beds it is Europe's largest holiday hotelierwhile its cruise operation is one of Europe's most successful. Havingrationalised its businesses through oneTUI it has ambitious growth plans todouble the size of its content.TUI Travel's leisure tourism business operates as a single organisationacross Europe with a portfolio of tour operator brands servicing more than30 million customers. Having differentiated itself from the rest of theindustry, its growth is focused on the continued development of uniqueholidays, which are available exclusively through its brands, distributeddirectly through its own channels with significant numbers of its customersflying on its modern holiday airline fleet.Core Mainstream Tourism BusinessThe Group would become a streamlined leisure tourism business which wouldenhance its growth and margin profile by vertically integrating the TUI AGhotel portfolio and cruise operations with the distribution capability ofTUI Travel. The Group would focus on broadening its customer offerings,leveraging its brands and implementing its unique proposition across muchof the hotel portfolio, providing a superior experience to its customers.The resources available to the Group would enable an acceleration of thedevelopment of new content, driving and broadening the range of uniqueholiday experiences that TUI Travel can deliver to new customers, therebyenhancing the Group's top line growth. A holistic end-to-end customer approach would be developed offering unique,high quality content from the strongest brands in tourism booking anytime,anywhere, any way - driving further expected growth through lifetimecustomer value, building loyalty, retention and increased, long-termsustainable profit growth.Key to this is operating effectively in a digital age. Single solutionsdeveloped and deployed to many would remove long-term infrastructure costand the Group therefore expects it would be able to focus cash utilisationto accelerate the development of TUI Travel's existing digital platformsacross the whole holiday cycle with two-way interaction - from suggestion,to research, to booking, travelling to the holiday, while on holiday,sharing it with friends and family and returning home to the suggestion forthe next leisure travel experience from the Group - every step of the way.In doing this, personal interaction on the ground at home, in the air andin the resort would provide considerable added-value expertise.The Core Mainstream Tourism Business recorded revenue of £13,426 million(excluding Inbound Services) and EBITA (excluding central costs butincluding Inbound Services) of £706 million in the financial year2012/2013.Non-Core BusinessesGiven the future of the Group would be its Core Mainstream Tourismbusiness, the management would focus on unlocking value from its othernon-core assets.The current Online Accommodation businesses and Specialist and Activitysector of TUI Travel would operate separately from the core tourismbusiness and opportunities to maximise their value for the Group would beactively pursued.The Online Accommodation business recorded total transaction value of£2,077 million and the Specialist and Activity sector recorded revenue of£1,433 million in the financial year 2012/2013. Combined EBITA for bothbusinesses was £81 million for the same period.The stake in Hapag-Lloyd Container Shipping held by TUI AG would be held asa business for disposal within the Group, resulting in the Group becoming apure play integrated leisure tourism business.Financial Benefits: Significant Shareholder Value Creation through bothGrowth and Financial BenefitsGrowth is the key driver for the proposed combination of TUI AG and TUITravel through the Merger, but financial benefits would be achieved in anumber of areas. The Independent Directors of TUI Travel and the ExecutiveBoard of TUI AG, having reviewed and analysed the potential synergies ofthe Merger, believe these would include: * Potential recurring cost savings of at least EUR45 million (£36 million)per annum are expected to be achieved by the third year following thecompletion of the Merger. Estimated one-off integration costs ofapproximately EUR45 million (£36 million) are expected to be incurred toachieve these cost savings* Use of carried forward tax losses and a more efficient tax groupingpossible under a unified ownership structure. Based on the group's taxcalculations for the 2012/13 financial year a cash tax benefit of EUR35million (£28 million) would have been achieved had the two businesses beencombined in that year* Top line growth is expected to be enhanced by commercial benefits such asaccelerated broadening of the portfolio of unique holiday experiences,increased occupancy levels in existing hotels, the future expansion of TUIAG's core hotel and cruise activities and integrated yield management* Simplification of the group structure unlocking further value within theGroup's businesses, particularly those within the current TUI AG portfolioAside from the one-off integration costs set out above, no materialdis-synergies (whether or not recurring) are expected in connection withthe Merger. The Independent Directors of TUI Travel and the ExecutiveBoard of TUI AG consider that the identified synergies would only accrue asa direct result of the success of the offer and could not be achievedindependently of the Merger.The above information on the potential synergy benefits should be read inconjunction with Appendix I which includes further details including thekey assumptions underlying the potential synergies.The Combination of the Businesses would Result in Accelerating Growth andStrong Cashflow PotentialThe Group would benefit from balance sheet strength, flexibility and strongfree cashflow generation.TUI AG and TUI Travel intend that any dividends paid for the 2013/2014financial year would ensure equivalent payment to TUI AG and TUI Travelshareholders, taking into account the exchange ratio and would be in linewith the current TUI Travel dividend policy.The Group intends to review its future dividend policy following completionof the Merger, and in light of its expected profits and free cash flowgeneration, targeting a level which is in line with TUI Travel's currentdividend policy.If the Merger is consummated, the impact of these financial benefits wouldstrengthen the long term prospects for the Group and therefore also forshareholders, customers, employees and other stakeholders.Governance: Assured Continuation of the Leadership TeamTUI AG would propose to its shareholders to increase the Supervisory Boardmembers from 16 to 20. This would be subject to approval in anextraordinary shareholder meeting, as the charter would need to be changed.The Supervisory Board would comprise ten members representing theshareholders, drawn in equal number from both TUI AG and TUI Travel, andten employee representatives. The new Supervisory Board would be chaired byProf. Dr. Klaus Mangold and Sir Michael Hodgkinson would be co-ViceChairman along with Frank Jakobi. Frank Jakobi would also be arepresentative of the employees.Prof. Dr. Klaus Mangold's term as Chairman of the Supervisory Board willend at the Annual General Meeting in February 2016 and he will then retire.Peter Long will then, on the proposal of the Supervisory Board, besuggested as a member of the Board at the Annual General Meeting in 2016.The Supervisory Board will undertake all necessary steps to achieve this,and TUI AG will inform its shareholders at the EGM in 2014 about PeterLong's future position.It is foreseen that for a limited period of two years, the SupervisoryBoard would have an Integration Committee, initially chaired by Prof. Dr.Klaus Mangold and co-chaired by Sir Michael Hodgkinson. Mainresponsibilities of this committee would be the monitoring of the Mergerand its implementation. It would advise the Executive Board as a whole andwould not have decision-making power.Peter Long and Friedrich Joussen would become joint Chief Executives of theGroup until February 2016 and would be jointly responsible for achievingthe envisaged synergy benefits from the Merger. It is planned that PeterLong would then become Chairman of the Supervisory Board of the Group.Friedrich Joussen would lead the Group as sole CEO from February 2016onwards.It is anticipated that Peter Long would focus on delivering the envisagedvalue creation for shareholders of the Group, and would also ensure thatthe non-synergistic Online Accommodation businesses and Specialist andActivity sector are managed separately in the Group, maximising value. Hewould also work closely with Friedrich Joussen to ensure a smoothtransition and hand-over until February 2016.Friedrich Joussen would be responsible for the strategy and futuredevelopment of the Core Mainstream Tourism Business and content platforms,all of which would be at the core of the Group in the future. He wouldfocus on leading the Group to become even more competitive in the digitalage. In particular, this would include an accelerated development of hotelsand cruise content, profitable growth in the Mainstream markets based onstrong enhanced central platforms like airline and IT to facilitate theachievement of the envisaged synergies.It is envisaged that the Executive Board of the Group would have a balancednumber of members drawn from TUI AG and TUI Travel. Apart from Peter Longand Friedrich Joussen it would further comprise: From TUI Travel* Johan Lundgren - Deputy-Group CEO leading all Mainstream markets * William Waggott - CEO of Online Accommodation businesses and Specialistand Activity sector focusing on managing these businesses separately forvalueFrom TUI AG* Horst Baier - Group CFO* Sebastian Ebel - HR/Arbeitsdirektor and in parallel responsible for allGroup platforms & processes - including Hotels & Resorts, Cruises and ITThe Group would be incorporated and headquartered in Germany and wouldretain a two tier board structure. All of the envisaged appointments wouldbe subject to final approval by the Supervisory Board. Group andoperational management would continue to be located in multiple locationsas the Group continues to draw on the expertise across its markets and theGroup would endeavour to optimally utilise the existing talent in bothcompanies.It is intended that the Group would adhere to both the UK CorporateGovernance Code and the German Corporate Governance Code to the extentpracticable, and is expected to be subject to the shared jurisdiction ofthe UK Takeover Code and applicable German takeover law.Key Terms of the TransactionIt is envisaged that the Merger would be achieved through a nil-premiummerger of TUI AG and TUI Travel, by way of a UK Scheme of Arrangementinvolving TUI AG issuing new shares to the TUI Travel shareholders (otherthan TUI AG and certain connected parties). It is anticipated that theenlarged share capital of TUI AG would then be listed on the premiumsegment of the main market of the London Stock Exchange and would seekinclusion in the FTSE UK Index Series (including FTSE 100).Under the proposed terms of the Merger, the TUI Travel shareholders (otherthan TUI AG and certain connected parties) would receive:0.399 New TUI AG Shares in exchange for each TUI Travel share held by themat the relevant record timeThe exchange ratio has been calculated on the basis that no dividend wouldbe paid by either of TUI AG or TUI Travel prior to completion of theMerger, other than the TUI Travel interim dividend of 4.05 pence per TUITravel share previously announced by TUI Travel and payable on 3 October2014. TUI AG and TUI Travel expect that any dividends paid for the2013/2014 financial year would ensure equivalent payment to TUI AG and TUITravel shareholders, taking into account the exchange ratio and would be inline with the current TUI Travel dividend policy.Listing and Indexation: Premium listing on the London Stock Exchange andintention to seek inclusion in the FTSE UK Index Series (including FTSE100)It is anticipated that the enlarged share capital of TUI AG would be listedon the premium segment of the main market of the London Stock Exchange andthe Group would seek inclusion in the FTSE UK Index Series (including FTSE100).Following completion of the Merger, it is anticipated that TUI AG's shareswould be delisted from the regulated market of the Frankfurt StockExchange. However, an Open Market Quotation would also be sought on theFrankfurt Stock Exchange to provide the opportunity for investors to tradetheir shares in the Group in Euro on a German stock exchange.Following completion of the Merger, it is anticipated that TUI AG would beeligible for inclusion in the FTSE UK Series Indices.Commenting on the Merger Sir Michael Hodgkinson, Deputy Chairman and Senior Independent Director ofTUI Travel said:"The Merger would deliver significant value to shareholders. This is partlydue to the simplification of the ownership structure, the operationalsynergies that we foresee and also the successful working relationshipalready established between TUI AG and TUI Travel. Shareholders of TUITravel can take great confidence from the fact that Peter Long and histeam, who have created so much value for TUI Travel's shareholders, wouldbe strongly influential in running the Group and the delivery of thosesynergies."Prof. Dr. Klaus Mangold, Chairman of the Supervisory Board of TUI AG said:"The Merger would unlock significant value creation potential. It is aunique opportunity to simplify our group structure and combines a strongGerman corporate structure with a leading UK capital markets and FTSE 100listing profile. It would create significant potential for ourshareholders, employees and customers. I would take responsibility togetherwith the above described integration committee. We will do everything togive comfort to the TUI AG shareholders to continue to be committed withtheir shares in the Group."Peter Long, Chief Executive of TUI Travel and Member of the TUI AGExecutive Board said:"I strongly believe that the Merger would give us the unparalleledopportunity to build on the successful platform we have created as TUITravel. Friedrich Joussen and I have formed a very effective partnershipover the last 18 months and together we would be able to accelerate ourunique holiday concept growth plans utilising TUI AG's strong assetportfolio, whilst seeking to maximise the value in our non-core businessesto deliver even greater value to all our shareholders as the world's numberone integrated leisure tourism business."Friedrich Joussen, Chief Executive of TUI AG and Chairman of TUI Travelsaid:"The Merger of TUI AG and TUI Travel would create the number one integratedleisure tourism group in the world and we would expect substantialsynergies from combining these two publicly listed companies. Our strengthwould come from the combination of a global tour operator business, sixairlines as well as a unique portfolio of tourism products includinghotels, clubs and cruise lines. All combined under the globally renownedTUI AG brand representing unique holiday experiences and setting qualitystandards for the industry. This also provides us with a competitiveadvantage for the ongoing digitalisation of the tourism sector. We areconvinced that the Merger, if implemented, would represent an important andpositive step for our shareholders and customers and would enable us tooffer attractive opportunities to our employees across 130 countries."Mr. Alexey Mordashov SupportMr. Alexey Mordashov, TUI AG's largest shareholder has indicated hissupport for the Merger, and said:"I am pleased with the recent business development of both companies. Thecombination will serve to improve the tourism business model and help drivefuture business growth for the benefit of both shareholder groups."Anticipated TimingIt is currently anticipated that any announcement of a firm intention toput forward a Merger proposal would not be made before mid-September 2014,with closing anticipated by around Spring 2015.Further InformationThis announcement is not an announcement of a firm intention to make anoffer under Rule 2.7 of the Code and there can be no certainty that anoffer will be made or as to the terms of any offer. Assuming a merger isformally proposed to shareholders, full details will be published at thattime relating to any proposals to be made to TUI Travel convertiblebondholders and to holders of options over TUI Travel shares.The parties reserve the right to introduce other forms of considerationand/or to vary the mix of consideration.In addition, TUI AG reserves the right to make an offer for TUI Travel atany time on less favourable terms:i. with the agreement or recommendation of the TUI Travel IndependentDirectors;ii. in the event that any TUI Travel dividend is announced, declared, madeor paid in excess of the interim dividend of 4.05 pence per TUI Travelshare previously announced by TUI Travel;iii. if a third party announces a firm intention to make an offer for TUITravel on less favourable terms; oriv. following the announcement by TUI Travel of a whitewash transactionpursuant to the Code.Statements of estimated cost savings and synergies relate to future actionsand circumstances which, by their nature, involve risks, uncertainties andcontingencies. As a result, the cost savings and synergies referred to maynot be achieved, may be achieved later or sooner than estimated, or thoseachieved could be materially different from those estimated. For thepurposes of Rule 28 of the Code, statements of estimated cost savings andsynergies in this announcement are solely the responsibility of theIndependent Directors of TUI Travel and the Executive Board of TUI AG. These statements are not intended as a profit forecast and should not beinterpreted as such. Appendix I includes reports in connection with thesynergy statements from PricewaterhouseCoopers LLP, Deutsche Bank AG("Deutsche Bank"), Greenhill & Co Europe LLP ("Greenhill") and Lazard &Co., Limited ("Lazard"), as required pursuant to Rule 28.1(a) of the Code.Each of PricewaterhouseCoopers LLP, Deutsche Bank, Greenhill and Lazard hasgiven and not withdrawn its consent to the publication of its report in theform and context in which it is included.The Independent Directors of TUI Travel comprise all directors of TUITravel other than Friedrich Joussen, Peter Long, Horst Baier and SebastianEbel, being those directors of TUI Travel who also have roles within theexisting TUI AG group. Peter Long, as CEO of TUI Travel, is notparticipating in the Executive Board (Vorstand) of TUI AG for the purposesof the Merger.Under Rule 2.6(a) of the Code, TUI AG is required, by no later than 5.00p.m. (London time) on 25 July 2014, to either announce a firm intention toput forward a merger proposal to TUI Travel in accordance with Rule 2.7 ofthe Code or announce that it does not intend to put forward such a mergerproposal, in which case the announcement will be treated as a statement towhich Rule 2.8 of the Code applies. This deadline may be extended with theconsent of the UK Takeover Panel in accordance with Rule 2.6 of the Code.The Executive Board of TUI AG and the Independent Directors of TUI Traveleach confirms its intention to request an extension to the deadline fromthe Panel if the parties are still in discussions at that time.A further announcement will be made in due course.A copy of this announcement will be available for inspection on TUITravel's website at www. tuitravelplc.com and on TUI AG's website atwww.tui-group.com by no later than 12 noon (London time) on the businessday following this announcement. For the avoidance of doubt, the contentsof these websites are not incorporated into and do not form part of thisannouncement.Details of Relevant Securities of TUI AG in IssueIn accordance with Rule 2.10 of the Code, TUI AG confirms that it has inissue:(a) 279,061,400 ordinary shares (without par value). TUI AG holds noshares in Treasury. The International Securities Identification Number("ISIN") for the ordinary shares is DE000TUAG000.(b) EUR 67,209,645.10 of convertible bonds with a coupon of 5.5% due inNovember 2014 in issue (the "TUI AG November 2014 Bonds"). The ISIN for theNovember 2014 Bonds is DE000TUAG117.(c) EUR 338,945,036.76 of convertible bonds with a coupon of 2.75% due inMarch 2016 in issue (the "TUI AG March 2016 Bonds"). The ISIN for the March2016 Bonds is DE000TUAG158.The TUI AG November 2014 Bonds and the TUI AG March 2016 Bonds areconvertible into TUI AG ordinary shares.Note:* The total number of ordinary shares comprises the registered sharecapital of TUI AG, together with all shares issued out of the conditionalcapital since the date that TUI AG's registered share capital was lastrecorded with the Commercial Register and in its charter.Details of Relevant Securities of TUI Travel in IssueIn accordance with Rule 2.10 of the Code, TUI Travel confirms that it hasin issue:(a) 1,118,010,670 ordinary shares with a nominal value of 10 pence each. TUI Travel holds no shares in Treasury. The ISIN for the ordinary shares isGB00B1Z7RQ77.(b) GBP 350,000,000 of convertible bonds with a coupon of 6.0% due inOctober 2014 (the "TUI Travel 2014 Convertible Bonds"). The ISIN for the2014 Convertible Bonds is XS0455660216.(c) GBP 400,000,000 of convertible bonds with a coupon of 4.9% due in April2017 (the "TUI Travel 2017 Convertible Bonds"). The ISIN for the 2017Convertible Bonds is XS0503743949.The TUI Travel 2014 Convertible Bonds and the TUI Travel 2017 ConvertibleBonds are convertible into TUI Travel ordinary shares.