China’s Fosun International plans to take tourism unit private

Bengaluru — Debt-laden Chinese conglomerate Fosun International is planning to take its tourism arm private in a deal that values Fosun Tourism at HK$9.71bn ($1.25bn) and responds to recent limited liquidity in the unit's shares.

The conglomerate already has a more than 78% stake in the leisure and tourism company and is offering HK$7.80 for every share it does not already own, a 95% premium to the last close on November 26, Fosun Tourism said on Tuesday.

Under the deal, Fosun Tourism will buy back its outstanding shares and will end up being owned by its controlling shareholder and get delisted.

Trading in Fosun Tourism’s shares has been halted since late November due to a pending takeover-related announcement. They are now expected to resume trading on Wednesday.

The parent company has been grappling with high debt and was looking to sell luxury resort Atlantis in southern China, Reuters reported in March.

The Fosun Group’s total debt was 222.31-billion yuan at the end of June.

The buyout offer comes at a time when Fosun, once known as one of China’s most acquisition-hungry conglomerates, seems willing to roll back its presence in the tourism sector.

Fosun Tourism’s other main asset is Club Med and sources have said that the conglomerate is exploring the sale of a minority stake in the French travel and tourism operator.

Fosun Tourism accounts for 9% of Fosun International’s overall revenue, with the conglomerate’s other businesses spanning healthcare, financial services and real estate.

Fosun Tourism’s shares are at a multiyear low and Smartkarma analyst David Blennerhassett had predicted a hefty premium for any takeover deal after the trading halt.

“A 100% premium is not unrealistic,” Blennerhassett said in a note, adding that Fosun Tourism stock was illiquid.

S&P Global said in a report in May last year that Fosun could continue to rely on asset sales and domestic banking support to reduce its debt burden. 

Reuters