Shares of the China-based Fosun Tourism Group (HK:1992) surged over 80% as of writing after the company revealed plans to buy back its shares and go private. Upon completion, Fosun Tourism will be 98.4% owned by its controlling shareholder, Fosun International (HK:0656), and be de-listed. Following the announcement, Fosun Tourism shares jumped to their highest level in the last 14 months. Trading in shares resumed today after being suspended since late November.
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Meanwhile, shares of the parent company, Fosun International, gained over 5%.
Fosun Tourism is a leisure-oriented travel group and has been listed on the Hong Kong Stock Exchange since December 2018. Meanwhile, Fosun International is a Chinese conglomerate focused on sectors like health, manufacturing, insurance, and asset management.
Fosun Tourism to Go Private
According to its statement, Fosun Tourism plans to acquire all outstanding shares at HK$7.80 each, marking a 95% premium over the stock’s last closing price. This transaction values the company at HK$9.71 billion.
The company stated that it chose to delist and go private due to persistently low trading volumes of its shares. Fosun Tourism is mainly hit by China’s slowing economy and pandemic-era border closures, which have impacted travel spending. As a result, the company has faced significant pressure in its operational and share performance. Additionally, the company cited its long-term goal of transitioning to an asset-light operation.
Citi Weighs in on Privatization Deal
Citi analysts stated that the delisting plan was logical due to the company’s struggling valuation amid the limited liquidity in the Hong Kong stock market. They further noted that the company has actively pursued an asset-light strategy to recover cash flow and reduce its debt levels. However, analysts believe it may take some time before this approach yields results.
Since its listing, Fosun Tourism shares have fallen by almost 60%.
