In 1841, the Englishman Thomas Cook chartered a train to transport up to 570 travellers from Leicester in the heart of England to Rabafrau for the Prohibition Convention. On this 11-mile round trip, Thomas Cook provided free lunch and snacks with ham and a hymn-singing band for groups of 1 shillings.
The event was regarded as the world's first commercial tourism event. In 1845, Thomas Cook opened his own office in London, becoming the world's first full-time travel agent. Thomas Cook himself is also seen as the founder of modern tourism.
In 2015, Thomas Cook decided to re-enter the Chinese travel market. Also the same year, Fosun announced the acquisition of a 5% stake in Fosun for £92 million. The two parties also signed a joint venture on June 15 of that year to jointly develop domestic and inbound tourism products for Chinese tourists under the Thomas Cook brand.
In 2019, Thomas Cook declared bankruptcy, and Fosun Tourism announced in November of that year that it had spent 11 million pounds (about 100 million yuan) to acquire the brand's trademark and intellectual property to rebuild the travel platform.
However, at present, Fosun seems to choose to give up this golden signboard.
01
The cultural tourism sector has been losing money for many years
On March 3, according to media reports, Fosun Tourism was considering selling its long-established British company, Thomas Cook.
In response to media interviews, a spokesperson for Fosun Tourism mentioned that since last year, Fosun has been conducting structural reviews of portfolio companies and studying how best to support future growth. If working with a potential partner is strategic to achieving Thomas Cook's business ambitions, the company will seriously consider doing so.
The reason why the news of this sale has attracted widespread attention is because Thomas Cook can be regarded as a golden signboard of Fosun Travel.
According to public information, Fosun Tourism and Culture Group (01992. HK, abbreviated as "Fosun Tourism", also known as FOLIDAY) is an important part of Fosun's "Happiness" sector, one of Fosun's four major business segments of "Health, Happiness, Abundance and Intelligent Manufacturing". Fosun Tourism was listed on the main board of the Hong Kong Stock Exchange in 2018 and is committed to becoming synonymous with family leisure and vacation experience.
Fosun Tourism's business covers three major segments: resorts, tourist destinations and leisure and vacation services and solutions. Among them, the resort business is composed of Club Med Club, resort hotel Casa Cook, Cook's Club and other high-end brands. Tourist destinations include Atlantis Sanya Atlantis, FOLIDAY Town, and Albion, a professional operator of tourist destinations.
According to Fosun Tourism, after the acquisition of Thomas Cook and the establishment of Thomas Cook lifestyle platform and travel agency, FOLIDAY's leisure and vacation services and solutions segment has been greatly improved.
However, despite the large stalls, Fosun Tourism's performance was not satisfactory. Wind data shows that from 2015 to 2021, Fosun Tourism's net profit after deduction was -419 million yuan, -392 million yuan, -481 million yuan, 188 million yuan, 628 million yuan, -1.41 billion yuan and -1.957 billion yuan, respectively. In other words, Fosun Tourism only made a profit in 2018 and the subsequent 2019 when it was listed, and lost money the rest of the time.
The performance was sluggish, and the controlling shareholder Fosun International Co., Ltd. (00656. HK, hereinafter referred to as "Fosun International") also began to reduce its stake in Fosun Tourism. In September 2022, Fosun International transferred 28 million shares of Fosun Tourism at a price of HK$8.57 per share, cashing out HK$240 million.
Two months after being reduced by the controlling shareholder, in November 2022, Fosun Tourism disclosed the news of major personnel changes. Qian Jiannong, then chairman of the company's board of directors, group chief executive officer and chairman of Club Med Holding, a non-wholly-owned subsidiary of the company, resigned. After Qian Jiannong's resignation, Xu Xiaoliang took over as Chairman, Henri Giscard d'Estaing was appointed as the Group Co-CEO, and Xu Bingxuan was appointed as the Group Co-President.
Despite claiming that it was a normal personnel adjustment, Qian Jiannong's resignation still made some investors who have been following Fosun Tourism for a long time sigh. It should be known that during his tenure as CEO of Fosun Tourism, Qian Jiannong led the team to complete a number of major acquisitions, which greatly improved Fosun Tourism's performance.
On the other hand, Fosun's remuneration for Qian Jiannong is also quite attractive. Wind data shows that from 2018 to 2021, Qian Jiannong's salary was 42.955 million yuan, 27.519 million yuan, 12.26 million yuan and 16.115 million yuan respectively, which is a relatively high level of salary among professional managers.
02
Hundreds of billions of debts have peaked
Qian Jiannong's resignation may have some helpless factors. And the Fosun Group behind Fosun Tourism is not having a good time.
On October 25, 2022, Moody's announced that it will downgrade Fosun's corporate family rating from B1 to B2. Moody's also downgraded the senior unsecured bonds issued by Fortune Star (BVI) Limited and unconditionally and irrevocably guaranteed by Fosun to B2 from B1. In addition, Moody's changed the outlook for all ratings to negative, reflecting uncertainty about refinancing and execution risk of asset sales.
Interestingly, Fosun issued a statement on October 24, the day before, saying that it had officially notified Moody's to terminate its commercial cooperation on rating services and stop supplying it with relevant information from that day.
Shortly before Fosun announced the termination of its business cooperation with Moody's, in June 2022, Moody's also announced that it would put Fosun International's Ba3 corporate family rating on the downgrade watch list. Cai Hui, senior vice president of Moody's, once mentioned that the rise in investors' risk aversion will put pressure on Fosun's already tight liquidity, and the company's domestic and foreign debt maturity will be large in the next 6~12 months.
However, Fosun quickly countered, saying that the company's current financial position is stable, with abundant cash and diversified financing channels to meet future business needs.
In August of that year, Moody's downgraded Fosun's corporate family rating from Ba3 to B1.
Behind the remarks of each opinion, the real financial situation of Fosun Group has also attracted attention. Fosun International's 2022 half-year report mentioned that as of June 30, 2022, Fosun International's cash and equivalent cash items at the end of the period were 108.198 billion yuan. It is worth mentioning that according to Wind data, Fosun International's short-term loans and long-term loans are 123.692 billion yuan in the current period. In other words, Fosun's cash and its equivalents cannot fully cover short-term debt.
As of the end of the first half of 2022, Fosun International's total assets were RMB849.685 billion, total liabilities were RMB651.156 billion, and the asset-liability ratio reached 76.63%.
At the same time, Fosun International's net cash flow from operating activities in the first half of the year was RMB7.979 billion. In 2021, Fosun International's operating cash flow was even -3.286 billion yuan.
Under the pressure of 650 billion yuan of debt, relying only on cash flow from operating activities to repay debts may be a very difficult and slow thing. News about Fosun International's sale of equity and assets has also frequently appeared in the media.
According to statistics, since 2022, Fosun International has frequently reduced its holdings and sold the assets of listed companies, including Fosun Pharma, Fosun Tourism, Nangang, Yuyuan, Hainan Mining, Tsingtao Beer and so on.
03
Tens of billions of Nangang mergers and acquisitions
Speaking of "selling", in recent times, Fosun International's investors have paid the most attention to the sale of its Nangang assets.
It all started in October 2022. Fosun International announced that Shagang Group (as the buyer) signed a framework agreement with Fosun Hi-Tech, Fosun Investment and Fosun Industrial Development (as the seller) on October 14, 2022. The Seller will fully sell its 60% equity interest in Nanjing Nangang Iron and Steel United Co., Ltd. (hereinafter referred to as "Nangang").
According to the framework agreement, the consideration of intent for the sale will not exceed $16 billion, and the buyer will have to pay a total goodwill payment of $8 billion. After the completion of the sale, the buyer will hold 60% of the equity of the target company, Nanjing Iron and Steel Group will hold 40% of the equity, and the seller will no longer hold any equity.
According to public information, Nangang was founded in 1958 and is located in Nanjing's Jiangbei New District. Nangang is an A+ enterprise (the highest grade) in the comprehensive competitiveness of Chinese steel enterprises, ranking 12th in the technological competitiveness of the world's steel enterprises in 2021 and 58th among China's top 500 manufacturing companies, and is a listed company Nanjing Iron and Steel Co., Ltd. (600282. SH).
Nangang was once an important part of Fosun's intelligent manufacturing sector. According to the financial report, in 2021, Nangang Co., Ltd. achieved a total revenue of 75.674 billion yuan, a year-on-year increase of 42.45%; The net profit attributable to shareholders of the listed company was 4.091 billion yuan, a year-on-year increase of 43.75%; Gross margin on steel sales was 15%. In 2021, the improvement of the operation and profit of enterprises such as Nanshan Iron and Steel Co., Ltd. and Hainan Mining Co., Ltd. also led to the improvement of Fosun International's profit in 2021.
Nangang's own excellent performance and competitiveness in the industry are also coveted by many capitals. Although Shagang Group has paid 8 billion yuan of sincerity money before, the sale of Nangang Iron and Steel has ushered in uncertainties a few days ago. According to market news, CITIC Special Steel, a 100 billion central enterprise also located in Jiangsu, may become the strongest competitor of Shagang Group. And this also casts a veil on this 10 billion acquisition again.
Fosun International is good at playing with capital layout, behind the sale of assets, in addition to the pressure of hundreds of billions of debts, it must also be to better free up capital to adjust the layout. And when the industry gradually recovers, will Fosun International stop the pace of "selling"?