Thomas Cook bought out by Chinese investors
Holiday firm Thomas Cook has announced that Chinese conglomerate Fosun Tourism will take a controlling stake in the firm.
Talks have been underway since July when Thomas Cook targeted a £750m injection of new money to provide sufficient liquidity to trade over the winter 2019/20 season.
The conclusion of the talks is that Fosun will contribute £450m in exchange for a 75 per cent stake in Thomas Cook’s tour division and a 25 per cent holding in its airline business.
The travel firm’s core banks and bondholders will provide the other £450m, taking a 25 per cent stake in the tour operator and a 75 per cent stake in the airline.
The deal is expected to be completed by early October 2019, dependent on details being agreed between Thomas Cook, its banks, and Fosun; and regulatory approval.
Thomas Cook deal: Winners and losers
The refinancing deal will be welcomed by holidaymakers with bookings, who feared for the company’s future.
In any event, all Thomas Cook holidays are ATOL protected which means customers won’t be stranded abroad if the company goes bust and they will be refunded for trips that can’t go ahead. However, flight-only bookings with Thomas Cook don’t enjoy the same protection.
The buyout will also save Thomas Cook’s 22,000 employees from redundancy.
Although the deal means Thomas Cook will continue trading, it’s not good news for existing shareholders. A statement from the company warned that existing shareholders’ interests in the recapitalised and reorganised group airline could be “significantly diluted”.
A statement from Thomas Cook said: “The current intention of the board is to maintain the company’s listing. However, the implementation of the proposed recapitalisation may, in certain circumstances, result in the cancellation of the company’s listing.”
Russ Mould, investment director at AJ Bell, said: “Shareholders in the troubled travel company may have to accept that their investment could be worthless. An update on its refinancing reveals that Chinese group Fosun and Thomas Cook’s lenders are going to get the lion’s share of the equity, meaning very little – if anything – is left on the table for the other shareholders.
“That would explain why the shares have fallen another 14 per cent on the latest news. Investors are simply trying to cash out and crystalise any value left in their investment before the refinancing, for fear there could be nothing left if they wait.”