Will Fosun rescue Thomas Cook?

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

951_MW_P07_Shares-Bottom

169970075

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".

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.

Recommended

Too embarrassed to ask: what is short selling?
Too embarrassed to ask

Too embarrassed to ask: what is short selling?

Short sellers are often accused of unfairly driving share prices down to make a quick buck. But short selling is a perfectly legitimate – if risky – t…
26 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
Three clean energy stocks for your portfolio
Share tips

Three clean energy stocks for your portfolio

Professional investor Christian Roessing of the Pictet Clean Energy Fund highlights of his three favourite stocks at the forefront of the clean energy…
25 Jan 2021
The MoneyWeek Podcast: let's talk about bubbles
Stockmarkets

The MoneyWeek Podcast: let's talk about bubbles

Merryn and John talk about the many obvious signs of a bubble in certain assets, including tech stocks, TikTok, and stock-trading 12-year olds. It's c…
22 Jan 2021

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021