Daily Management Review

Thomas Cook’s largest shareholder is ready to help in exchange for controlling interest


The world's oldest travel company, Thomas Cook, announced that negotiations with its largest shareholder, the Fosun Tourism Group, and creditor banks about a new large package of investments in the framework of recapitalization. As expected, the investor’s injection of £ 750 million into the company will allow Thomas Cook to continue normal operations in the near future. In exchange, however, the investor will gain control over Thomas Cook’s tourism operations and share in its airline.

British Thomas Cook Group confirmed the fact of negotiating with the largest shareholder on last Monday. On Friday, this world's oldest travel company, operating since 1841, announced details of the negotiations. The parties are discussing recapitalization of a £ 750 million infusion into the Thomas Cook Group, which the Chinese Fosun Tourism Group is ready to make.

These funds will be enough to support the British company throughout the tourist season of 2019/20 and find “financial flexibility for investing in the business in the future,” the press release says.
The Fosun Tourism Group is one of China’s largest private conglomerates. In recent years, it has already bought several European and American companies in the field of health, tourism and fashion, including international travel operator Club Med (transaction amount € 939 million) and the English Premier League football club Wolverhampton Wanderers (£ 45 million ).

Now, the Chinese conglomerate owns an 18 percent stake in Thomas Cook. The deal with Thomas Cook, if is carried out, will increase the package of the Chinese investor in the tour operator to the controlling one. In addition, it will receive a minority stake in Thomas Cook airline.

However, when making a transaction on such terms, value of shares of other shareholders of the British company will significantly blur.

After news of the negotiations with the Chinese investor of Thomas Cook appeared on the London Stock Exchange, the company’s papers fell nearly 47%.

CEO of the travel company, Peter Fankhauser, admits: "It costs us a high price, with a significant erosion of the value of the shares of our current shareholders, many of whom have owned these shares and supported our business for many years."

Thomas Cook’s debts amount to £ 1.2 billion. In the first half of the year, the company posted a loss of £ 1.5 billion; since the beginning of the year its shares have fallen by 60%, and in less than a year the company has made three warnings about lower profits.

source: ft.com