China's Fosun buys 5% stake in Thomas Cook

[LONDON] China's Fosun International has bought a 5 per cent stake in Thomas Cook Group, deepening its foray into Europe's tourism sector and potentially helping the British company to compete with travel leviathan TUI Group Fosun paid 91.9 million pounds (US$140.1 million) for the Thomas Cook stake and will seek to double its holding in the world's oldest travel group to 10 per cent, it said in a filing to the Hong Kong stock exchange on Friday.

News of the investment sent shares in Thomas Cook soaring 15 per cent to 139 pence, their highest level for about six months.

Thomas Cook said in a statement that it expects the tie-up to enhance earnings in the financial year to Sept 30, 2016, assuming plans under the partnership are implemented in 2015.

One of the plans is to explore collaboration opportunities with Club Mediterranee, the French holiday company it bought last month, where Fosun is looking to turn around a business struggling in Europe and move more aggressively into fast-growing markets such as China. "The investment in Thomas Cook complements other recent investments of the group in the sector, providing opportunities for further value creation," Fosun Chairman Guo Guangchang said in the filing, adding that there is increasing demand for international leisure travel.

The president of Fosun's tourism and commercial group, Qian Jiannong, told reporters that the group does not plan to use the investment as a first step towards acquiring Thomas Cook in its entirety.

Thomas Cook, meanwhile, said the deal would help to accelerate its plans to develop more specialised hotels and would aid expansion in China over the medium term as the pair develop hotel brands tailored to the Chinese market.

That could strengthen Thomas Cook's ability to compete against the world's biggest tourism and leisure company TUI Group, which was formed in December from the merger of London-listed TUI Travel and German majority owner TUI AG.

Fosun's purchase, in the form of a new share issuance at 125.59 pence a share, is being undertaken by Fosun's subsidiary Companhia de Seguros. The price represents a 4.1 per cent premium to Thomas Cook's closing price on Thursday.

Thomas Cook is in the midst of a cost-saving plan but aims to grow this year despite tough trading conditions in mainland Europe. It made a loss of about US$80 million in the three months to Dec 31.

Fosun's bid for Club Med, which valued the company at about US$1.15 billion, was finalised in early February.

REUTERS