Thomas Cook shareholders face wipeout in £750m rescue deal

Shareholders will be virtually wiped out in a £750 million rescue of ailing Thomas Cook by Chinese investor Fosun, the tour operator admitted on Friday.

Thomas Cook said it is in “advanced discussions” with Club Med owner Fosun, its largest shareholder with an 18% stake, and lenders on a “substantial” new capital investment which secures the future of the group.

The £750 million injection would ensure 178-year-old Thomas Cook — saddled with a £1.6 billion debt pile — can cut debts, continue to trade over the difficult winter period and invest in the business.

Fosun would get a majority stake in the firm’s tour arm and a minority holding in the airline. It said today it is a “committed” investor.

But existing Thomas Cook shareholders will be “significantly diluted” as part of the shake-up.

Shares in the firm plunged more than 5.3p, or more than 40%, to 7.93p. That is down from 140p per share in May last year.

The package holiday group’s boss Peter Fankhauser 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.”

Thomas Cook said shareholders could get the chance to take part in the restructuring by investing alongside Fosun, but provided no details.

The rescue follows a tumultuous period for Thomas Cook. Fankhauser said the firm is having to sell some three million holidays a year to cover interest and financing costs around debt. It currently sells in excess of 11 million package deals a year as well as flights.

The firm is also struggling with over-capacity in the market, and weaker demand. It had to issue a string of profit warnings after falling victim to an unusually hot summer last year in the UK, prompting scores of would-be holidaymakers to stay at home.

Thomas Cook first confirmed in June it was in talks for a sale of its tour operating business after “receipt of a preliminary approach” from Fosun, a division of billionaire Guo Guangchang’s empire.

The company has separately been seeking buyers for its airline, comprising 103 planes. It today put the sale process on hold pending the outcome of the new recapitalisation plan.