The global travel company Thomas Cook that is undergoing a restructuring program because of financial issues that it faces currently is in negotiations with the Chinese conglomerate Fosun International with the divesting its tour operator business as the company looks to offload some of its business to generate money.
After media reports about the negotiations Thomas Cook confirmed that it was in “discussions with Fosun following receipt of a preliminary approach”. The 178-year-old travel company is facing acute financial crisis because of a £1.25 billion debt on it.
“There can be no certainty that this approach will result in a formal offer. However, the board will consider any potential offer alongside the other strategic options that it has, with the aim of maximising value for all its stakeholders,” the company said.
The news of he divestment talks helped share of Thomas Cook to rise by 24% to 18p in early trading while finally settling at 10% at 17.78p. The trouble for the company can be gauged from the data that about a year ago, the share value of the company was at 114.2p.
With a client base of about 11 million in the UK, Scandinavia and the rest of Europe, last year Thomas Cook had generated £7.4bn in revenues from its tour operator business. The company currently operates through 566 high street stores in the UK alone which accounts for the majority of its 22,000 workforce. Online platform of the tour business of Thomas Cook accounts for half its holiday sale.
With an 18 per cent stake, Fosun is the largest shareholder of Thomas Cook and the Chinese firm had in 2015 purchased the holiday resort chain Club med for £834 million. Earlier this year, its German airline Condor was put up for sale by Thomas Cook but bidding for that business cannot be done by Fosun because it is not based in the EU.
Fosun is currently constructing some of Thomas Cook’s hotels in China in partnership with the oldest holiday and travel company, since 2015 when the Chinese firm first invested in the British company.
There have been several bidders for the airline of Thomas Cook which includes names such as Lufthansa. A bid for the entire Northern European Business of Thomas Cook was made by the private equity firm Triton Partners about three weeks ago. That business of Thomas Cook is made up of a tourism unit and an airline which are active in the markets of Norway, Sweden, Finland and Denmark.
Last month, after reporting a £1.5 billion loss for the first half of the current year, Thomas Cook was forced to seek out fresh debt from its lenders to avoid a cash crunch. One of the major reasons for the loss was because of a £1.1 billion writedown against MyTravel – its package holiday business, because of weak trading.
“Sadly, it rather looks like Thomas Cook will be carved up in some fashion or other. This may not be a bad thing – clearly managing this large, complex holiday business proved daunting. But selling off the various bits of the business is likely to be even more complex,” said Neil Wilson, an analyst at the online trading firm Markets.com.
(Adapted from FinancialTimes.com)