Thomas Cook in rescue talks with China's Fosun

Andrew Cummings
July 14, 2019

On Friday, Thomas Cook stunned the market when it unveiled a debt-for-equity swap deal that would see conglomerate Fosun and its lending banks inject £750 million into the business to stave off a collapse.

A Thomas Cook Airbus A321-200 airplane takes off at the airport in Palma de Mallorca, Spain, July 28, 2018.

Fosun Group is considering taking control of Thomas Cook Group's tour business, in a deal that targets an injection of £750 million (S$1.3 billion) into the London-based company that is facing pressure from creditors amid a slowdown in sales.

If a deal is struck Thomas Cook will have to let Fosun take the reins, but cultural clashes due to business norms or an overriding strategy could mean the deal causes more problems than it solves.

The world's oldest travel company has been battered by fading demand for its package holidays, high debt and a hot 2018 summer in Europe, which deterred bookings.

This announcement results from the strategic review of the group airline announced in February, and subsequent approaches for the tour operator.

Fankhauser said the proposed deal with Fosun and lenders would put the firm on a "totally different financial footing" with "massively reduced debt levels".

"While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees". As a modern worldwide investment company, Fosun may encourage Thomas Cook to enhance booking online, causing even more job cuts and future store closures.

The group has been struggling with a £1.9 billion debt pile. "Every year we have to sell 3 million holidays before we have our interest burden paid", he told reporters.

Shares in Thomas Cook were down 43.5% to 7.42 pence by 0730 GMT on July 12.

Thomas Cook warned earlier this year that the European travel market has become "progressively more challenging", which has led to a dent in its finances and has made it hard to sell its tour business. Its higher-margin airline business - which includes German holiday carrier Condor - had revenue of £3.5 billion.

Cash-strapped travel firm Thomas Cook, which was founded in Leicester, has said it is in "advanced discussions" with Chinese conglomerate Fosun, paving the way for a sale of its tour operator business.

The proposal comes a month after it said it was in talks with Fosun following a preliminary approach.

It is one of China's so-called "gray rhino" companies - along with Dalian Wanda Group Co (萬達集團), HNA Group Co (海航集團) and Anbang Insurance Group Co (安邦保險集團) - that have come under growing scrutiny in the past few years from Chinese authorities wanting to crack down on debt-fueled foreign acquisitions.

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