Fosun Debts Lead to Potential Club Med Sell-Off
Overzealous acquisitions, economic turmoil and a global pandemic are yet to break the French leisure group Club Med
The Fosun Growth and Empire
Known for its all-inclusive resorts offering a range of leisure activities from fine dining to yoga, scuba diving and baby gym classes, Club Med is a renowned, upmarket French leisure group that specialises in curating holiday-worthy tourist destinations. Over the years, Club Med sucessfully expanded by making a series of strategic moves including signing a 10-year accord with the Chinese group China Pao Shan in 2011 to expand on a holiday village in China and aiming to double its capacity to 300 rooms for 2013 alongside plans to go from four to 15 all-inclusive village resorts from 2016 to 2020. According to the Taipei Times and Bloomberg, a consortium led by Fosun bought the Parisian-based Club Med in a 2015 deal valued at about 939 million Euros (US$969 million), beating out Italian investor Andrea Bonomi in a bidding war that lasted over a year. Part of the Fosun empire includes the Wolverhampton Wanderers from the English Premier League, Portugal’s largest bank Millennium BCP, as well as French fashion house Lanvin and resort owner Club Med.
Read More: Second Club Med Resort in China
Cracks In The Kingdom
Recent years have seen the resort chain face growing financial concerns no doubt followed by the decline of the tourism industry brought on by the COVID-19 pandemic and quarantining measures in China. The Taipei Times reported that Fosun Tourism shares had fallen by 19 percent in Hong Kong trading by 2022, giving it a market value of about HK$10.5 billion (approx US$1.3 billion). That same year, Fosun, which owns Club Med through its listed leisure arm Fosun Tourism Group, reviewed a number of assets leading to further speculation (but no certainty) that it could decide to proceed with any transaction. According to the Taipei Times, a representative for Fosun said the group has “no plans” to sell Club Med. Reports from Forbes however claim a different story stating that the debt crisis faced by China’s real estate market has led to Fosun struggling to raise capital resulting in a “sell off assets before it defaults on its short-term debt”.
Further problems loom as Fosun finds itself racking up dept in an effort to fund its other major acquisitions resulting in an inability to cover short-term liabilities. According to Forbes, Fosun International’s dollar bonds recently fell to records lows. This has resulted in a snowball effect which sees shares of Fosun International “tumbled” almost 50 percent over 2021 and 2022, reaching a 10-year low since its listing in 2007. As of 2022, Fosun International’s total debt had accumulated to approximately 650 billion Yuan (US$90 billion) in total liabilities. Bloomberg also reported in 2022 that Fosun was planning a US$11 Billion of asset sales in 2023.
In May 2023 Fosun International agreed to sell 80 percent of its ownership in the diamond-related investment arm of Alpha Yu to a fund controlled by New York-based Blackstone for US$455 million. Reports also claim that the first half of 2023 saw Fosun Tourism’s business volume see “a staggering 24 percent” growth. This was in part, fuelled by the revival of Club Med and the “company’s ability to elevate room prices well above pre-pandemic levels”. The Fosun Tourism Group now anticipates an expected profit of 430 million Yuan in the first half of 2023, compared to a loss of 197 million Yuan during the same period last year. While profits may be on the up, Fosun has to catch up to competitors and in doing so, regaining the trust of investors into the company.
Overall, in a bid to stave off the losses accumulated over the years, Fosun might regain stability in selling off the regained-growth of Club Med, and we are anticipating this move to happen in future.
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