Comment: Why Thomas Cook deal is unlikely to be derailed

Industry sources question whether Anex Tourism has £2.5 billion, says Travel Weekly’s Ian Taylor

Thomas Cook’s new investor, Turkish tour operator Neset Kockar, insisted this week he has alternative proposals to put to Thomas Cook and its banks.

Kockar took his newly acquired stake in Thomas Cook to 8% last week as the travel giant remained in talks on a takeover by its creditor banks and bondholders and Chinese group Fosun.

Podcast: Thomas Cook – future secured?

The plan to recapitalise Thomas Cook, announced last month, would see Thomas Cook’s creditors take control of its airline and a minority stake in its tour operator in a debt-for-equity swap, while Fosun acquires the travel group and a minority stake in the carrier.

Kockar wants to insert himself in the process.

News agency Bloomberg reported this week: “Kockar is demanding a role in rescuing the troubled UK travel giant.”

Kockar is the chairman of Anex Tourism Group, based in Antalya, Turkey. He told Bloomberg: “The problems [at Thomas Cook] can be overcome by injecting less cash than the recap plan. I see managerial problems rather than simply financial issues.

“My aim is not to make a profit by trading Thomas Cook shares. Everyone sees it as a broken machine, but if the right steps are taken it’s a great machine which will work efficiently again.”

In reality, Thomas Cook’s debt is precisely the problem. It dwarfs the group’s cash surplus and threatens to bankrupt it this winter as it almost did last.

The debt is a hangover from Thomas Cook’s last crisis in 2011-12 – which in turn was a hangover from the financial crisis and downturn of 2008 and after, exacerbated by a period of excessive acquisition at Thomas Cook before and during this period.

Current chief executive Peter Fankhauser took over in late 2014.

Whatever mistakes the company’s management may have made since then have compounded this central problem, they did not create it.

The group desperately needs recapitalising, which is what Fosun, the banks and bondholders propose in a takeover worth about £2.35 billion.

New investor has own ‘business plan’

Kockar told Bloomberg he is devising a business plan for Thomas Cook and has been in touch with investment banks working with the company and Fosun.

However, Travel Weekly understands there has been no contact between Thomas Cook or Fosun and Kockar.

The Anex Tourism chief told Bloomberg: “When I invested, the reaction of the share price proved there were like-minded investors who have made the same diagnosis.”

He suggested there are “many interested parties”.

Kockar argued Thomas Cook should remain a single company. In fact, although the group will be separated as part of the Fosun deal, it will not be broken up.

He added: “I can contribute capital, mutual synergies and operational know how. I have my own sources of finance and action plans, and I would like to discuss these.”

It would be remiss of the banks not to listen to Kockar’s proposals. But the chances that his access to capital – or the mutual synergies he can propose – could outgun those of Fosun appear slim.

Or as one industry source put it: “If Kockar has £2.5 billion, then fantastic.”

A second interested party duly appeared this week. A Russian investor, Lilia Rodionova, based in Ulyanovsk – a city southeast of Moscow – acquired a 3.46% stake in Thomas Cook.

I have no idea who Lilia Rodionova is and Thomas Cook declined to comment. But a cursory online search suggested she could be a restauranteur, a musician or an academic.

Let’s assume she is a restauranteur. The share purchase may be a gambler’s punt. Or the shares may have been purchased on behalf of someone else – possibly Kockar or an associate. Anex Tourism has extensive interests in Russia.

I have no reason to doubt Kockar’s interest in Thomas Cook is genuine. However, his ability to influence events appears limited.

Owning 8% of near worthless shares, purchased for about £7 million when Thomas Cook needs north of £2 billion, will not give him much leverage.

Fosun is China’s biggest privately-owned corporation. Thomas Cook’s creditors are some of the world’s leading banks.

Kockar is a tour operator in Turkey and Russia whose attempt to launch airline Azur Air in Germany in 2017 floundered in September 2018 after 15 months of loss making. It had just three aircraft.

The larger Azur Air Russia was threatened with withdrawal of its air operating certificate by the Russian aviation regulator last year over the airworthiness of its aircraft and poor on-time performance.

It is difficult to see Kockar’s alternative rescue plan cutting much ice with Fosun and the banks when they perform due diligence on Anex Tourism, should his approach extend that far.

Time is also pressing. Thomas Cook has to recapitalise by the end of September. The group made that clear in May when it announced the availability of a new £300 million credit facility which it no longer requires.

So whatever Kockar intends, he will need to act quickly. There are about seven weeks for everything to be tied up.

The reality for Thomas Cook shareholders

Fosun outlined its plans for Thomas Cook last week in a series of meetings with creditor banks and bondholders.

The UK’s Mail on Sunday newspaper reported Fosun plans to attract more Chinese visitors to Europe and will establish new destination management organisations (DMOs) to assist Chinese visitors in destinations such as Egypt and the Greek islands.

Fosun also intends to increase Thomas Cook’s winter sports, adventure holidays, city breaks, music festival packages and sales of Club Med holidays and develop the group’s hotel brands.

Fankhauser told German trade magazine FVW this week: “I can rule out Thomas Cook getting a Chinese look.

“We have worked successfully with Fosun for four years. The Fosun management values the Thomas Cook brand.”

A group of Thomas Cook’s bondholders are now in negotiations with Fosun and Thomas Cook as completion of the deal moves nearer.

Fosun is not proposing to buy Thomas Cook’s shares. It proposes to recapitalise the company in a deal with the banks. Fosun is not going to buy up the recently purchased shares.

Thomas Cook’s shareholders, new and old, stand to lose all but a nominal holding in the revamped company – likely to be no more than a single-digit percentage share of the Thomas Cook plc which will be owned by the banks and bondholders.

Shares are available for Kockar and Rodionova to buy because the big institutional investors in Thomas Cook have been selling down their stakes.

The purchase of those shares has caused a small leap in the share price in the past fortnight and this small-scale volatility may continue until the final deal is laid out.

It may attract the interest of the odd investment analyst. But it’s irrelevant in the scheme of things. The real news will come in September.

When Thomas Cook announced the deal last month, it noted it was in “advanced discussions” with Fosun and its banks. It is hard to see the deal being derailed by the odd outside punt.

Fankhauser acknowledged then that the deal would not please shareholders.

“This is not the outcome any of us wanted for our shareholders,” he said, but added: “This is a pragmatic and responsible solution which provides the means to secure the future of the Thomas Cook business for our customers, suppliers and employees.”

That is the reality.

MoreTurkish travel entrepreneur raises Thomas Cook stake

Fosun: What you need to know about the Chinese conglomerate set to take a majority stake in Thomas Cook


Share article

View Comments

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.