Jun 11, 2019 03:21 AM

Fosun Jumps on Report of Talks to Buy Thomas Cook Tour Unit

Thomas Cook and Fosun set up a travel agency partnership to cater wealthy Chinese tourists in 2016. Photo: Bloomberg
Thomas Cook and Fosun set up a travel agency partnership to cater wealthy Chinese tourists in 2016. Photo: Bloomberg

(Bloomberg) — Fosun International Ltd. shares advanced the most in more than two months after a report that its tourism unit is in talks to buy Thomas Cook Group Plc’s tour-operating business.

Discussions are at an early stage, and it isn’t certain a bid will emerge, Sky News reported June 8, citing people it didn’t identify. Hong Kong-listed Fosun, already Thomas Cook’s biggest shareholder with about 18%, is working with JPMorgan Chase & Co., and an offer could come “within weeks,” Sky said.

Shares of Fosun International jumped as much as 4.4% Monday in Hong Kong, the biggest intraday gain since March 29. Fosun Tourism Group stock gained 2% as of 11:07 a.m. local time in thin trading.

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 pounds ($9.4 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.

If completed, a deal could also benefit from booming travel demand out of China. Mainland travelers completed 150 million visits overseas last year, almost 15% 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% of tourists from the mainland.

Club Med

Officials at both companies declined to comment on the Sky report when contacted by Bloomberg. Fosun Tourism Group is a division of billionaire Guo Guangchang’s drugs-to-insurance conglomerate, which owns the luxury resort brand Club Med.

Fosun Tourism Chairman and CEO Qian Jiannong said in a May 28 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."

Thomas Cook has lately been grappling with dwindling bookings and uncertainty related to the U.K.’s departure from the EU. Selling at least part of the operation is crucial to the company’s survival because a new 300 million-pound ($382 million) loan announced last month is conditional on making progress with a disposal. Shares of the London-based company have plunged 86% in the past year.

Any deal would exclude Thomas Cook’s airline business, which Fosun would be unable to acquire under 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.

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