Fosun Group, one of China’s largest private conglomerate, is mulling over a spin-off of its global travel business for an IPO.
The Club Med owner has enjoyed such a mega buying binge over the last few years that it needs to raise money. Debt is now 115 billion yuan (around $17 billion) and has become a problem.
Fosun has announced that is looking to raise RMB 40 billion (USD 6 billion) to improve its credit rating. The IPO is certainly a possible move, says Bloomberg, quoting the CEO of flagship unit Fosun International, Liang Xinjun.
“We will sell assets to repay debts,” Liang said in an interview earlier this month. “We have ample capability to get investment grade ratings. So either strategically, or tactically, Fosun is crystal clear that this has become our strategy.”
Travel is one of the four business legs in the group’s growth strategy, so an outright sale is certainly unlikely. The travel division has been building nicely since Fosun made its first step into tourism in 2010.
Internationally, Fosun’s portfolio includes theatrical producer Cirque du Soleil. Club Med, fully acquired last year for EUR 960 million has since been expanded in China with four new resorts.
Fosun’s website presentation says that “Club Med plans to open 15 more resorts in China in the next five years to make the total number of its resorts to reach 20.”
China has become Club Med’s second biggest market in terms of sales and remains to be the fastest growing market with annual growth rate exceeding by 20%.
There is also the new 807-apartment and 197-villa resort Atlantis Sanya off the southern China coast, which will be opened next year after an RMB 11 billion investment. A second China ski resort will be opened at the end of this year.
Thomas Cook announced earlier that it planned to buy 50 hotels and resorts around the Mediterranean in a deal with Fosun. Fosun will provide the money and Thomas Cook will manage the properties under its existing hotel brand names.
Another possible Fosun move could be the purchase of Apple Leisure Group (ALG). Reuters said last month that Bain Capital Private Equity was checking out interest in ALG after approaches from Fosun and another Chinese conglomerate, HNA Group (which agreed in April to buy Carlson Hotels).
Wang Qunbin, Fosun’s president said last month to Bloomberg that the group wants to grow into an empire with a market value of USD 100 billion. Currently the market capitalisation of Fosun-controlled companies totals around USD 26 billion.
The board is very clear on its acquisition strategy - it will limit them to industries it defines as "health, wealth and happiness," according to Liang.
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