$700M Fosun Tourism IPO Offers a Stake in Money-Losing Travel Unit

Fosun Tourism, a recently spun off unit of Hong Kong-listed Fosun International filed proof of an IPO application with the Hong Kong stock exchange on Monday that revealed the latest step in what the company is said to plan as a $700 million stock listing.

The upcoming listing on the Hong Kong exchange would give investors a chance to buy into a portfolio of Fosun’s tourism assets that includes 70 Club Med resorts around the world, but would also give them a slice of the company’s losses on those travel bets that totalled over RMB 1.72 billion ($251 million) from 2015 through 2017.

A report today from Reuters cited sources familiar with the planned listing as saying that the stock offering could be worth as much as $700 million, after Fosun invested some $1.3 billion over the past eight years purchasing the UK’s Thomas Cook travel group, in addition to other tourism assets.

This latest step in the planned tourism listing comes after Fosun got a green light from the Hong Kong exchange on July 4th to spin off its tourism unit. While the potential timeline for the IPO has yet to be released, the redacted prospectus revealed, however, that Fosun Tourism suffered a net loss of RMB 295 million in 2017, with another RMB 135 million negative performance in the first half of this year.

The company’s net loss in 2015 was RMB 954 million followed by a RMB 473 million shortfall in 2016. Fosun submitted its latest documents regarding the planned public offering to the exchange just over three months after opening its $1.74 billion Atlantis resort in the Hainan island city of Sanya.

Fosun to Spin Off Tourism Assets From “Happiness” Division

The IPO would offers investors a stake in the tourism business that, along with the group’s entertainment, and fashion operations has constituted what Fosun calls its “Happiness” division. In 2017, that “Happiness” unit produced revenue of RMB 11.7 billion ($1.72 billion), accounting for 13.3 percent of Fosun’s total revenue, while the unit’s profits amounted to RMB 497.5 million.

According to a related document published last Friday, “It is expected that upon the Proposed Spin-off and Listing, there will be a public float of no less than 25%,” with Fosun International aiming to retain no more than 75 percent of the stock in the company, which would remain a subsidiary of the parent firm. This week’s redacted prospectus lists CLSA, Citigroup and JPMorgan as joint sponsors for the IPO.

The company created the tourism division as part of what its billionaire chairman, Guo Guangchang sees as a bet on the growing power and changing tastes of mainland consumers.

“We would like to introduce up-market tourism and holiday products available globally to China to accommodate the shift in demand from simple sightseeing to leisure holiday travel,” Guo said in a 2013 interview with the University of Pennsylvania’s Wharton School before it began its series of acquisitions. Guo noted at the time that, “When income levels improve, the demand for tourism and education grows.”

IPO Gives Opportunity to List Club Med Holding

Fosun acquired Club Med, its best-known tourism business, in 2015, after engaging in a two-year bidding war for the resort operator which eventually cost the group €939 million (then $1.07 billion).

According to the company’s interim report published on August 28th, Fosun Tourism holds a 91.83 percent interest in Club Med, and has launched a new brand named “Joyview” in China. Earlier this year, Club Med Joyview opened its first two hotels in Anji, in northwestern Zhejiang province close to Shanghai, and in the Beijing elite retreat of Beidaihe, in northern China.

Earlier this year Club Med reported that it had served 1.35 million customers in 2017 — its highest visitor numbers since 2009, and that revenue had increased by 4.4 percent year-on-year.

In an interview in Qinhuangdao when the Golden Coast Joyview hotel was launched, Fosun senior vice president chairman of Fosun Tourism and Leisure Group Qian Jianrong said that his company is also eyeing expansion in North America’s tourism and leisure market through acquisitions.