China's Fosun acquires 5% stake in Thomas Cook
07 Mar 2015
Shanghai's Fosun International, one of China's fastest-growing conglomerates, yesterday pumped in around £100 million into Thomas Cook to acquire a 5-per cent stake.
It intends to double that stake in the world's oldest travel company to 10 per cent through open-market share purchases
Fosun, set up by four Chinese graduates with $4,000 in 1992, is now worth $7 billion.
The Chinese company, chaired by entrepreneur Guo Guangchang, who styled himself as ''the Warren Buffett of the East'', bought French travel giant Club Med last month in a deal worth €939 million.
Shares in FTSE 250-listed Thomas Cook shot 24.5 per cent on news of the deal which, according to its chief executive Peter Fankhauser, was mostly about accessing China's huge tourism industry and selling Club Med holidays at high-street stores.
He said it was about tapping into new growth opportunities in the biggest and fastest-growing leisure market in the world, adding, China was even bigger than the US last year in terms of the number of foreign trips.
According to Thomas Cook, it expected the tie-up to enhance earnings in the financial year to 30 September, 2016, assuming plans under the partnership were implemented in 2015.
The jump in the company's share price reversed a 13-per cent decline after CEO Harriet Green's surprising exit in November and a further drop after it warned in February of a tough trading environment in Europe.
According to the president of Fosun's tourism and commercial group, Qian Jiannong, who spoke to reporters, the group did not plan to use the investment as a first step towards acquiring Thomas Cook in its entirety, but the Chinese company had some form with such maneuvers.
Reuters quoted Panmure Gordon analyst Karl Burns as saying the fact the Chinese were taking a 10-per cent stake in Thomas Cook would underpin the share price now. If it ever fell again, people would say it could become a bid target.
According to Thomas Cook, the boost to future earnings would come from plans to explore collaboration opportunities with Club Med, which Fosun was positioning for a more aggressive move into fast-growing markets such as China as it sought to turn around the French company's struggling European operations.
