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Fosun Tourism sees 'much difficulty' in Thomas Cook acquisition

Club Med resorts operator considering $909m proposal from UK firm

In July, Fosun Tourism said it is considering a proposal made by London-listed Thomas Cook in relation to potential investment and reorganization.   © Reuters

HONG KONG (NikkeiMarkets) -- Fosun Tourism Group, the operator of the Club Med branded resorts, expects to face hurdles in the planned acquisition of a controlling stake in Thomas Cook Group, its chairman and chief executive said on Monday, adding that there was a chance the Chinese company will not take part in the latter's re-organization.

"Like any merger and acquisition, the acquisition of Thomas Cook involves much difficulty," Qian Jiannong said at a post-earnings news conference. "Various sides have got their own priorities. We are intensively listening and negotiating with various parties."

In July, Fosun Tourism said it is considering a proposal made by London-listed Thomas Cook in relation to potential investment and reorganization.

Under the proposal, Thomas Cook is targeting an injection of 750 million pounds ($909 million) of new money, which may comprise capital injection and new financing facilities, Fosun had said in that filing. It also mentioned that Thomas Cook's external bank and bond debt will be converted into equity.

The recapitalization would require reorganization of the ownership of Thomas Cook's tour operator and airline business, resulting in Fosun owning a controlling stake in Thomas Cook's tour operator and a minority interest in Thomas Cook's airline, the filing added.

"There are some long-term value investing principles that we will not give up though," Qian said. The company does not see Brexit impacting the negotiation process.

Fosun Tourism, part of conglomerate Fosun International, which raised $428 million in its initial public offering late last year, saw its share price fall 48.2% so far this year.

The stock rose 4.5% to HK$8.35 on Monday after reporting interim results, while the city's benchmark Hang Seng Index gained 2.2%.

Qian said the company is not 'happy' with the current share price. "It does not show our value."

Earlier Monday, the company reported it swung to net profit of 490.02 million yuan ($69.55 million) for the first half from net loss of 254.52 million yuan year-ago as revenue rose 35.9% on year to 9.06 billion yuan.

Fosun Tourism remains confident on its strong pipelines to open new resorts in the future, it said in an exchange filing. These include a resort in l' Alpe d' Huez in France, a new chalets-apartments in Grand Massif Samoëns Morillon in France and a resort located in Miches Playa Esmeralda in the Dominican Republic, which is likely to open in 2019, among others.

In addition, the company signed several contracts to open new resorts in China in the next few years, including the Club Med resorts in the Lijiang and Taicang project, the filing said.

The company is in discussion with holiday resorts in several provinces in China to provide resort management services, Qian added.

-- Benny Kung

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