Thomas Cook surges after tour-operator business offer

Thomas Cook surged as much 24 per cent after confirming it received an offer for its tour-operator business from Chinese investor Fosun International.

Hong Kong-listed Fosun, already Thomas Cook’s biggest shareholder, owning about 18 per cent, has submitted a preliminary approach and talks are underway, the UK company said in a statement on Monday.

Sky News reported on June 8th that takeover negotiations were being held. Thomas Cook, the world’s oldest travel agency, rose 12 per cent to 18 pence as of this morning in London, after hitting 20 pence earlier.

Fosun’s tourism arm is a division of billionaire Guo Guangchang’s drugs-to-insurance conglomerate, which owns the luxury resort brand Club Med. The Chinese company jumped 4.2 per cent in Hong Kong on Monday, the biggest gain since March, 29th.

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Thomas Cook has lately been grappling with dwindling bookings and uncertainty related to the UK’s departure from the EU. Selling at least part of the operation is crucial to the company’s survival because a new £300 million (€338 million) loan announced last month is conditional on making progress with a disposal.

Shares of the London-based firm had plunged 86 per cent in the past year, prior to today. An acquisition of the world’s oldest travel agency would help the Chinese conglomerate gain control of a business that serves 11 million customers and reported £7.4 billion in revenue last year. It would also give Fosun a say in the future of Thomas Cook, whose shares and bonds have tumbled amid concerns over the company’s ability to return to profit and avoid being crushed under a pile of debt.

No certainty

Thomas Cook said there is no certainty of a formal offer from Fosun. The board will consider any proposal alongside “the other strategic options” that the company has. A deal, if completed, could also benefit from booming travel demand out of China. Mainland travellers completed 150 million visits overseas last year, almost 15 per cent more than in 2017, according to the Ministry of Culture and Tourism.

In 2016, Thomas Cook and Fosun set up a travel agency partnership to cater to the wealthiest 20 per cent of tourists from the mainland. Club Med Fosun Tourism chairman and CEO Qian Jiannong said in a May 28th interview that acquisitions as well as organic growth would be part of the company’s business model. Fosun is well placed to take advantage of the European and Asian markets, he said.

“We do believe we have synergies with this company because the European market is still the largest in the leisure holiday business,” he said of Thomas Cook last month.

“If you combine the market of these two continents together, it will make a very, very interesting business.”

Airline business

Any deal would exclude Thomas Cook’s airline business, which Fosun would be unable to acquire due to European Union rules, Sky said. Other companies may also be weighing bids for parts of Thomas Cook. The tour operator last month received an offer for its Scandinavian arm from private equity company Triton Partners. It said it was evaluating the offer, though no decision had been made. There has also been an approach for its airline unit from Portuguese airline Hi Fly, the Mail on Sunday has reported. – Bloomberg