Thomas Cook – Fosun Talks Confirmed

10 June 2019
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Thomas Cook - Fosun Talks Confirmed 
Rupesh Tailor, Everest Research, 10 June 2019

  • Thomas Cook has this morning confirmed weekend press reports "that it is in discussions with Fosun following receipt of a preliminary approach [to acquire Thomas Cook's tour operator business]" but with the customary caveat that "there can be no certainty that this approach will result in a formal offer"

 

  • We initiated last week (4/6/19) with a buy recommendation (see our note) on Thomas Cook's € 6.25% 2022 senior unsecured notes at a price of 37.12 (yield to worst c. 53%) and took a long position of 3% in our model portfolio here. We also initiated on Thomas Cook's equity with a speculative buy at 15.0p per share, taking a long position of 0.1% in our model portfolio here (noting the risk of complete loss here but also potential for as much as 16x upside)

 

  • This morning the 2022 bonds are trading at a price of 49.52 (YTW c. 36%) and the shares at 19.35p per share, up c. 12.4pp (33% in market value terms) on the bonds and c. 29% on the equity from our entry levels last week. We maintain our buy recommendation as per our note in which we outline why we see a going-concern break-up of the group as more likely than a near term administration or CVA and look specifically at the rationale for Fosun owning both its Club Med business and Thomas Cook's Group Tour Operator. See also our weekend blog post on this

 

Contact Rupesh Tailor at Everest Research to discuss: rupesh.tailor@everestresearch.co.uk

 

 

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