Will Fosun rescue Thomas Cook?

China’s Fosun International is considering bidding for beleaguered British travel company Thomas Cook’s tour operating division.


(Image credit: 2013 Getty Images)

Some "good news" has arrived at last for Thomas Cook's shareholders, says the Financial Times. China's Fosun International Ltd is considering bidding for the beleaguered British travel company's tour operating division. Fosun's bid comes shortly after Thomas Cook outlined plans to sell its airline in order to gain access to a new £300m financing facility. Whatever happens with Fosun, the airline sale is likely to go ahead since, under EU rules, the Chinese group wouldn't be allowed to own a majority stake in it anyway.

If you own shares in Thomas Cook, you shouldn't get carried away, since a sale to Fosun "is unlikely to leave investors much wealthier", says Lex in the FT. Even after this week's uptick, the stock is still 90% below last year's peak. While it is "a vintage brand plenty of Chinese tourists would appreciate", high indebtedness "weakens Thomas Cook's hand" in talks with Fosun, which has already spent £200m on an 18% stake .

Thomas Cook's shareholders should be grateful if they get anything, since the alternative is "complete wipeout", says Christopher Williams in The Daily Telegraph. Remember, "it won't be the shareholders calling the shots in this situation" as it's "the banks and hedge funds that hold the company's distressed bonds" who have the final say on the deal. They will judge it on Fosun's "plans for the future".

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If they are not convinced that Fosun's plans "come with cash to pay down debt", they could choose to take control of the company themselves. That would also mean that Fosun's £200m investment would be reduced to ashes.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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