Chinese seize control of Thomas Cook

Relief for holidaymakers but misery for shareholders as 178-year-old tour operator is rescued

One of the world’s oldest travel companies has fallen into Chinese hands, all but wiping out shareholders’ stakes in the process.

Troubled British giant Thomas Cook, set up in Market Harborough in 1841, has reached an agreement with its lenders and major shareholder Fosun to bring the company back from the brink, with £900m of new funding.

The deal, which is yet to be finalised, will see Chinese group Fosun take control of 75pc of the tour operator business and 25pc of the airline, leaving other shareholders with almost nothing.

The refinancing will come as good news for holidaymakers who feared for their bookings as Thomas Cook teetered on the verge of collapse. And sources close to the company suggested it will save Thomas Cook’s 22,000 employees from redundancy.

But shareholders, including the individuals who owned around 20pc of the company, will be left nursing heavy losses as their stock is now almost worthless.

Fosun, which owns Club Med and Wolverhampton Wanderers Football Club, has agreed to put in £450m. Lenders will cancel the £1.6bn of debt they are owed and pump in another £450m.

Around £300m of that is likely to come from Thomas Cook’s major lending banks as a loan, and £150m from key bondholders as they increase their stake.

in an arrangement one City analyst called ‘highly unusual’, and which indicates how desperate Thomas Cook was, Fosun even recouped up to £5.4m from the near-bust travel company to pay for lawyers and other advisers it hired to work on the deal.

in return for their £900m, Fosun and the lenders will get increased stakes, watering down the value of shares which current investors own to virtually nothing.

At the moment Thomas Cook is worth just £91m, a fraction of the size of its bailout, after shares fell 93pc over the past year.

it may not even be able to remain listed on the stock market, leaving the future of small shareholders in limbo, since it could breach rules which govern how much control an investor can have or how many shares are available to readily buy and sell.

Thomas Cook, which served 22m customers last year, is planning to split in two as part of the rescue.

The tour operator business, along with Thomas Cook’s 566 High street stores, will be spun off while the listed company will be left holding the airline.

Fosun will take on at least 75pc of the tour operator business and 25pc of the airline. Meanwhile lenders and bondholders will bag approximately 75pc of the company holding the airline, and up to 25pc of the tour operator.

The airline business, which owns 104 planes, will probably have to change its name as the Thomas Cook brand sails away with the tour operator. shares fell another 16.6pc, or 1.18p, to 5.9p yesterday. Russ Mould, investment director at AJ Bell, said: ‘investors are simply trying to cash out and crystallise any value left in their investment before the refinancing, for fear there could be nothing left if they wait.’

Other analysts marvelled that shares were still worth 5.9p, since their value will be watered down so heavily.

Trouble at Thomas Cook started in earnest last year, after it reported slipping profitability for the first half of its financial year, in May 2018.

The deaths of British couple John and susan Cooper that summer, in a Thomas Cook hotel in egypt, piled on further pressure.

in september, the travel firm issued a profit warning in which chief executive Peter Fankhauser blamed 2018’s unusually hot summer for knocking bookings.

Just two months later, Thomas Cook put out another profit warning and axed its dividend as it said 2018 had been ‘disappointing’.