Thomas Cook in £750m rescue deal talks with biggest shareholder

The struggling travel company Thomas Cook is in talks over a £750m rescue package that would give its Chinese investor Fosun a majority stake in the company’s tour operator business.

The firm confirmed on Friday that is in “advanced discussions” with the Club Med owner and Thomas Cook’s main lenders over the deal, which would ensure it could continue trading through the winter.

The fresh capital injection would give Fosun, Thomas Cook’s largest investor with an 18% stake, a majority stake in the tour business – which sells package holidays – and a minority holding in the company’s airline. It would also significantly dilute the value of shares held by other investors.

Thomas Cook owes its name to a humble and deeply religious 32-year-old cabinet-maker who, one June morning in 1841, hiked the 15 miles from his home in Market Harborough to Leicester, to attend a temperance meeting.

The former Baptist preacher believed that the ills of Victorian society stemmed largely from alcohol and, presumably fatigued from his walk, realised he could deploy the power of Britain’s flourishing rail network to help spread the word.

Addressing the temperance meeting, he suggested that a train be hired to carry the movement’s supporters to the next meeting in Loughborough.

Thus, on 5 July 1841, some 500 passengers travelled by a special train for the 24-mile round trip, paying a shilling apiece.

Over the next few years, Cook laid on ever more trains, introducing thousands of Britons to train travel for the first time. The first such outing to be run for commercial purposes was a trip to Liverpool in 1845.

Over the next decade or so, the business expanded to offer overseas trips, to France, Switzerland, Italy and beyond, to the US, Egypt and India.

His more business-minded son John expanded the tour operator and its reach was such that the government enlisted its expertise in an effort, ultimately in vain, to relieve General Gordon at the siege of Khartoum in 1885.

John’s three sons inherited the business, which incorporated as Thos Cook & Son Ltd in 1924 and benefited from the increasing ease of international travel.

Its first flirtation with collapse came during the second world war, when the government requisitioned some of its assets and it was sold to Britain’s railway companies, effectively a nationalisation.

But it boomed in the postwar years as growing prosperity fuelled the appetite for holidays and it returned to private ownership in 1972.

Since then, it has changed hands and changed shape via a series of mergers and takeovers. It nearly collapsed in 2011 but averted its demise with a bailout deal funded by banks.

Now, after 178 years of operation, it is relying on its largest shareholder – the Chinese conglomerate Fosun – to survive. 

The deal would expand Fosun’s holdings in Europe. The company, which is one of China’s largest private-sector conglomerates, bought the holiday resort chain Club Med in 2015 for €939m (£844m), and acquired the Premier League football club Wolverhampton Wanderers for £45m in 2016.

Thomas Cook shares hit a record low of 7.1p on Friday, falling 46% in morning trading. In May Thomas Cook’s shares slumped 40%, when a high-profile City analyst said the company’s shares were practically worthless.

It has yet to be decided whether the company, which employs 22,000 people, will be delisted and go private as a result of the pending deal. Bidders are also circling Thomas Cook’s airline business.

Peter Fankhauser, the chief executive of Thomas Cook, said: “After evaluating a broad range of options to reduce our debt and to put our finances on to a more sustainable footing, the board has decided to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our longstanding shareholder Fosun and our core lending banks.

“While this is not the outcome any of us wanted for our shareholders, this proposal is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, our suppliers and our employees.”

He assured the proposal would have no impact on holidays and flights.

A spokesperson for Fosun said: “Fosun is a shareholder in Thomas Cook because it is a British company operating in the global travel industry, in which we have extensive experience. We are committed investors, with a proven track record of turning around iconic brands including ClubMed and Wolverhampton Wanderers FC.”

Fankhauser said it would be up to Fosun to decide on store closures or job cuts but said the deal should be welcomed by staff.

“Today’s announcement is really about a plan that ensures the business to continue to trade and operate as normal, and the deal preserves our brand … So that is principally really good news for our employees.”

He said that given the sensitive nature of the discussions with Fosun, Thomas Cook had not yet engaged with other stakeholders, such as labour unions, but would now begin that process.

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The pending agreement with Fosun replaces plans for Thomas Cook’s lenders to inject £300m into the business. That package, announced in May, was meant to stave off a cash crunch after Thomas Cook ran up a £1.5bn loss in the first half of the financial year. That figure was because of a £1.1bn writedown of its package holiday division, which struggled amid weak trading conditions.

The 178-year-old travel company said on Friday that the European travel market had only become more challenging in recent months.

Thomas Cook has so far sold about 75% of its holidays for this summer, which is slightly ahead of bookings over the same period last year. However, its tour operator bookings are down 9%. While bookings have improved in recent weeks, Thomas Cook said it was still struggling in light of intense competition from rival travel companies.

The proposed deal could be closed and approved by the end of the year.


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