6th Mar 2015 12:52
LONDON (Alliance News) - Shares in Thomas Cook Group PLC were flying high Friday, after Chinese investment firm Fosun International Ltd bought a 5% stake in the UK travel operator and said it plans to increase its stake to 10% by buying shares in the open market over time.
Under the deal, Thomas Cook will issue Fosun with 73.1 million new shares for GBP91.8 million, giving it a 5% stake in the business. Fosun will then buy shares in the open market to take its stake up to about 10% over time. The share issue values Thomas Cook shares at 125.58 pence.
Thomas Cook shares were up 21.6% at 146.70 pence Friday afternoon, a near nine-month high for the stock.
Fosun International, chaired by Chinese billionaire Guo Guangchang who started the investment group with three friends whilst at university back in 1992, is in the process of buying France's Club Mediterranee SA for EUR939 million after a long battle, having become its largest shareholder in 2010.
Fosun's other investments are focused on the Chinese insurance, industrial, steel and mining sectors. It also has pharmaceutical, healthcare and property subsidiaries, as well as an asset and fund management business and its strategic investment business. Fosun is buying the Thomas Cook shares through its Portuguese insurance subsidiary Fidelidade-Companhia de Seguros SA.
Thomas Cook and Fosun said the deal is a strategic partnership and they'll cooperate internationally in a number of business areas, including potential new growth areas. That cooperation will include with Club Med, which is pushing its resorts into the Chinese market. Thomas Cook and Fosun said the deal will give Thomas Cook access to the Chinese tourism market over the medium-term, including as a tour operator. The pair are also looking at creating a hotel investment platform under a partnership model, including developing a hotel brand tailored to the Chinese leisure market.
"Our partnership with Fosun is aimed at accelerating our profitable growth strategy by allowing us to further develop our differentiated product in our core destination markets, to collaborate with Fosun's other portfolio businesses particularly in France, and to access the world's largest and fastest-growing tourism markets with an experienced local partner," Thomas Cook Chief Executive Peter Fankhauser said.
The Fosun deal is the latest stage in a remarkable turnaround for Thomas Cook, which nearly went out of business in the wake of the financial crisis, having built up a huge debt pile that it struggled to maintain.
Former Chief Executive Harriet Green spent the past two years bringing the company back from the brink, streamlining the business and paying down debt by selling off assets, closing travel shops, cutting costs and honing and focusing its offering. Green shocked the market last November when she abruptly stepped down, having overseen an increase in the group's share price from just 14 pence to over 130 pence. Thomas Cook said the group now needed a "different set of qualities" to drive the business forward, and former chief operating officer Peter Fankhauser was promoted to CEO.
Last month, Thomas Cook said it narrowed its fiscal first quarter operating loss from the year before, as it continued to cut costs across the business, although it said pricing and competition remained fierce and trading in continental Europe tough.
"The trading environment in many of our markets continues to be tough, but we believe the measures we are taking to improve our businesses will continue to strengthen our competitive position," said Fankhauser in the group's trading update in February.
By Sam Unsted and Rowena Harris-Doughty; [email protected]; [email protected]; @SamUAtAlliance; @rharrisdoughty
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