Fosun Group (復星國際) is considering nearly a US$1 billion rescue of embattled British tour operator Thomas Cook, the Hong Kong-listed conglomerate said yesterday.
The Chinese company said in a stock market announcement that there are “ongoing advanced discussions” about a capital injection that would see a debt-for-equity swap at the British travel agency, which has struggled with its debt pile.
The deal would equate to a ￡750 million (US$940 million) rescue of the London-based firm.
Fosun Group is already a minority investor in Thomas Cook — with a stake of about 18 percent — and owns French luxury holiday resort group Club Med SAS, which it bought for more than US$1 billion in 2015.
The plan, which is still subject to the approval of shareholders and regulators, would involve Fosun’s tourism group taking a controlling stake in Thomas Cook’s tour operating business and a minority share in its airline arm.
The British firm in May said that first-half losses widened on a major write-down, caused in part by Brexit uncertainty that has delayed summer holiday bookings.
In a note to the London Stock Exchange ahead of the market opening yesterday, Thomas Cook said that the “new money that would provide sufficient liquidity to trade over the winter 2019-2020 season and the financial flexibility to invest in the business for the future.”
The group had total debt of about ￡1.9 billion as of March 31, data compiled by Bloomberg showed, and its shares have tumbled 87 percent over the past 12 months.
“Fosun is hoping that Thomas Cook’s brand name and global reach will expand its business among wealthy Chinese tourists,” Orient Capital Research managing director Andrew Collier told Bloomberg News. “Bondholders are expecting this synergy to work, otherwise they wouldn’t convert debt to equity.”
Shares in Thomas Cook dived almost 40 percent in early London trading yesterday, having risen 20 percent earlier in the week on rumors of a Fosun bid.
“Thomas Cook’s largest shareholder Fosun is in advanced talks with management over a deal that would effectively hand over the company to the Chinese firm.
Shareholders face significant dilution — basically it’s wipe-out time,” Markets.com chief market analyst Neil Wilson said.
The Shanghai-based Fosun Group conglomerate has been on a buying spree in the past few years, and taking control of Thomas Cook would significantly expand its business in Europe.
As well as tourism it has interests in property, finance, pharmaceuticals, steel and entertainment.
It is one of China’s so-called “gray rhino” companies — along with Dalian Wanda Group Co (萬達集團), HNA Group Co (海航集團) and Anbang Insurance Group Co (安邦保險集團) — that have come under growing scrutiny in the past few years from Chinese authorities wanting to crack down on debt-fueled foreign acquisitions.
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