Thomas Cook unveils rescue plan with Chinese owner

Thomas Cook Group has confirmed it is in ‘advanced discussions’ about a rescue package with Fosun, its largest shareholder.

The travel group’s shares sunk to their lowest price ever following the announcement, plunging 40% to just 6.25p. 

Admitting that the deal was not the outcome it wanted for shareholders, chief executive Peter Fankhauser said it was, however, the best decision for customers, suppliers and staff.

"After evaluating a broad range of options to reduce our debt and to put our finances onto 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 long-standing shareholder, Fosun, and our core lending banks," he said.

"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." 

Under the deal, £750 million of ‘new money’ would be injected to allow Thomas Cook to trade over the winter 2019/20 season and have the ‘financial flexibility’ to invest in the business for the future.

China-based Fosun would own a ‘significant’ controlling stake in Cook’s tour operating business and a ‘significant’ minority interest in its airline.

A statement said existing shareholders will be significantly diluted as part of the recapitalisation, but shareholders may be given the opportunity to participate in the recapitalisation by investing alongside Fosun and converting financial creditors on terms to be agreed. 

Cook said the decision followed a strategic review earlier this year which had originally ended with plans to sell off Cooks’ airline.

"Since commencing the review, the operating environment in the European travel market has become progressively more challenging," said the statement.

"This has impacted the Group’s underlying financial position and its ability to execute a disposal of the airline or the tour operator, either in whole or parts, in a way which returns satisfactory value to the Group and its stakeholders. 

"As a result, the Board has concluded that it is in the best interests of all the Group’s stakeholders to pursue a full recapitalisation of the Group supported by new investment into the business."

It said plans to sell off the airline have been paused, pending the outcome of the recapitalisation.