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China's Fosun considers $940m rescue for Thomas Cook

Club Med operator thinks it can revamp iconic British tour company

The 178-year-old British travel company reported a pre-tax loss of £1.5 billion in May.   © Getty Images

TOKYO - China's Fosun Tourism Group is considering a combined 750 million-pound ($940 million) bailout for British global travel company Thomas Cook.

The travel arm of Chinese conglomerate Fosun International, which also owns the Club Med resort franchise, said Friday that it had received a proposal made by Thomas Cook in relation to a potential recapitalization and separation of the 178-year-old travel company.

The deal to convert Thomas Cook's external bank and bond debt into equity would see Fosun take a "significant controlling stake" in the iconic British company's tour business and a "significant minority interest" in its airline business, the company said in a statement.

Already Thomas Cook's largest shareholder with an 18% stake, the Fosun deal would significantly dilute the holdings of other existing shareholders. Final details are yet to be disclosed, with advanced discussions between Fosun, Thomas Cook and its banks still ongoing.

"While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution," Thomas Cook Chief Executive Officer Peter Fankhauser said in a statement.

Thomas Cook has suffered at the hands of surging online travel agencies and low cost airlines, reporting a pre-tax loss of 1.5 billion pounds in May. The company has issued three profit warnings over the past year.

In May, Citigroup analysts said there was no longer any equity value in the travel company, after having accumulated debt equal to the combined value of its tour operations and airline business.

Fosun, on the other hand, sees Thomas Cook as a potentially valuable addition to its China operations, which could be revamped in the same way it breathed new life into Club Med after acquiring the ailing resort franchise in 2015 for 939 million euros ($1.1 billion).

"Thomas Cook is a well-known brand, and has a lot of resources in Europe, which have made very good synergies so far," Jim Qian, Fosun Tourism's chairman and CEO, told Nikkei Asian Review in May.

"Europe has been through many challenges, including financial crisis in 2008 and Brexit," said Qian. "But for us, we believe Europe is the world's largest leisure holiday market so it is interesting for us to know their business."

Fosun and Thomas Cook jointly founded Thomas Cook China in 2016, focusing on China's growing outbound and inbound travel markets. Thomas Cook China will also operate Thomas Cook-branded hotels in Fosun's developing China resorts portfolio.

In 2017, the two companies also jointly established a tour operator business for Chinese vacationers.

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