Chinese investor Fosun Tourism Group checks in for bid talks on Thomas Cook's tour armFosun Tourism Group is already Thomas Cook's lar
Chinese investor Fosun Tourism Group checks in for bid talks on Thomas Cook’s tour arm
- Fosun Tourism Group is already Thomas Cook’s largest shareholder
- It informed the London-listed firm of its interest late last week
- Fosun has drafted in bankers from JP Morgan to handle the proposed deal
A Chinese investor in Thomas Cook is in talks to buy the firm’s tour operating business – a move that could lead to the break-up of one of Britain’s oldest and best known travel companies.
Fosun Tourism Group, which is already Thomas Cook’s largest shareholder with an 18 per cent stake, informed the London-listed firm of its interest late last week.
Fosun has drafted in bankers from JP Morgan to handle the proposed deal, while Thomas Cook is being advised by heavyweight investment banks Credit Suisse, Morgan Stanley and Bank of America Merrill Lynch.
Troubles: Thomas Cook has been battered on the stock market in recent months
The 178-year-old travel company, which serves 19million holidaymakers every year, has been battered on the stock market in recent months, leading to fears over its future. The firm, along with other holiday operators, has seen its financial performance hit by uncertainty over the UK’s departure from the EU, unstable consumer confidence and a low pound-to-euro value.
Last month, its shares sank to 10p – down from more than £1 a year ago – after the company reported a half-year loss of £1.5billion. This was compounded when an analyst note from Citigroup effectively said Thomas Cook’s shares were worthless.
The debacle has fuelled speculation that chief executive Peter Fankhauser’s job could be on the line. The low share price had led to City rumours that Fosun – a Hong Kong-listed company that first invested in Thomas Cook in 2015 – was poised to make a move.
Discussions have begun between advisers for Fosun and Thomas Cook, but they are at an early stage and could yet fall through.
Thomas Cook, founded in 1841, is made up of two divisions – its tour operator, which last year reported revenues of £7.4billion, and the airline, which had a turnover of £3.5billion. The group put its airline up for sale earlier this year in a bid to reduce its debts.
The Mail on Sunday revealed last week that Portuguese airline Hi Fly has joined a list of potential suitors for the airline – which could be valued at up to £1billion – that includes Virgin Atlantic, Germany’s Lufthansa and aviation investor Indigo Partners. As a Chinese firm, Fosun is not able under EU rules to buy Thomas Cook’s airline business.
It was also reported last month that private equity firm Triton is considering a bid for Thomas Cook’s airline and tour operating business in Northern Europe, which could complicate a Fosun deal.
Travel workers’ union the TSSA said news of Fosun’s interest was ‘very worrying’ for its members, who may fear for their jobs.
TSSA general sectary Manuel Cortes said: ‘The company has already announced the closure of some of its high street shops after it posted a £1.5 billion loss due to Brexit uncertainty. Now we have speculation about the potential break-up of the company. We will be seeking an urgent meeting with Thomas Cook to clarify if there is any truth to the latest speculation.’
News of Fosun’s interest in Thomas Cook’s tour operating arm – first reported by Sky News yesterday – is likely to drive up the London-listed firm’s share price tomorrow, burning hedge funds that have been building up their short positions.
Data from the Financial Conduct Authority (FCA) shows that Whitebox Advisors, TT International, Silver Point Capital, Highbridge Capital Management and AQR Capital Management have amassed a short position of 8.24 per cent in the company. Short-selling a company’s stock means that hedge funds make money when shares fall, but lose it when they rise.
Thomas Cook declined to comment. Fosun could not be reached.