China's Fosun in advanced talks to invest $940m in Thomas Cook

14 July, 2019, 07:10 | Author: Regina Silva
  • Thomas Cook has no choice but to undergo radical change Buzz travel | eTurboNews |Travel News

Under the proposal, an injection of £750m of new money would be provided to the company, offering it sufficient liquidity to trade over the winter 2019/20 season and "invest in the business for the future".

Thomas Cook is the UK's oldest tour operator having been set up in 1841 but recently has struggled to afford its high street presence.

"We are committed investors and have extensive experience in turning around iconic brands including Club Med and Wolverhampton Wanderers FC", confidently states Fosun Tourism.

"While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution", he added.

The world's oldest travel company, which has been hit by fading demand for its package holidays, high debt and a hot 2018 summer in Europe, has also been weighing approaches for its airline business and Nordic operations.

Thomas Cook's proposal envisions that a significant amount of its external bank and bond debt will be converted into equity, and that existing Thomas Cook shareholders will have their stakes significantly diluted as a result of the recapitalisation.

"Whilst this has always been seen as the likely route out of the mire for Thomas Cook, there are several questions remaining, for instance, how would this deal impact the proposed airline sale?"

Analysts said Thomas Cook's predicament showed how businesses needed to be careful with their balance sheets, particularly in sectors with unpredictable costs and earnings.

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A year ago Thomas Cook's share price stood at 104p, and the stock ended their first day of trading after listing on the stock market in June 2007 at 320p.

Unsurprisingly the market hates the idea, sending Thomas Cook's share price crashing more than 46% in mid-morning trading.

Fosun has been purchasing tourism assets including France's Club Med, as the industry is viewed as key to China's shift towards a more consumption-driven model of economic growth from an investment and export-led one.

The British holiday company's tour business had 11 million customers in 2018 and produced £7.4 billion in revenue.

The firm said it is in advanced discussions with Chinese conglomerate Fosun over a £750 million cash injection, paving the way for a sale of its tour operator business.

"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.

The proposal is subject to due diligence and further discussion, among other things, Fosun said.

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