China's Fosun International raises bid for Club Mediterranee to $1.15 bn

A consortium led by Chinese financial and industrial conglomerate Fosun International has raised its bid for struggling French resort operator Club Mediterranee at the eleventh hour, trumping a €24 a-share offer from Italian investor Andrea Bonomi.

Fosun, China's largest privately held conglomerate, over the weekend raised its bid offer to €24.60 per share, valuing the Paris-based company at €939 million ($1.15 billion).

The sweetened offer, which is backed by Club Med's management, also includes Club Med's convertible securities.

The latest bid makes it the longest public takeover battle in French corporate history.

This is the eighth offer Club Méd has received since May 2013 when Fosun had initially teamed up with the management of Club Méd and French private equity firm AXA Private Equity (now known as Ardian) and tabled a €17 a share offer. (See: China's Fosun, Axa Private Equity join management buyout of Club Méditerranée)

The new offer just ahead of a deadline at Friday's market close, trumped the €24-a-share bid made on 5 December by the Global Resorts consortium led by the Bonomi.

The French stock market regulator AMF has now set a new deadline of 7 January 6 p.m. for Bonomi's consortium to raise its offer.

Club Med's stock price rose 0.4 per cent to €25.05 yesterday, an indication that investors once again expect a counterbid.

Club Med's investors have been watching the battle with keen interest as the company's stock price has surged by over 74 per cent since Fosun tabled its first offer in May 2013 and up by 44 per cent this year.

Bonomi, through his investment arm Strategic Holdings, has slowly been buying shares in the resort chain and is now the single-largest shareholder with around 18.9 per cent, while Fosun-led consortium holds 18.3 per cent.

The Fosun consortium comprises Gaillon Invest II - majority controlled by Fosun - which holds 62.6 per cent stake, Portuguese insurer Fidelidade which holds 20 per cent, Ardian with 5.8 per cent, the management of Club Med with 2.9 per cent and Chinese travel agency U-Tour with 8.7 per cent.

Fosun plans to retain Henri Giscard d'Estaing, son of the former French president, as the company's chairman and CEO of Club Med.

Despite several rounds of counter-bids, Club Méd's management has consistently supported Fosun's offer.

The management is now alarmed that both bidders have now tabled bids that are valued more than the company's actual worth, and the winning bidder will resort to drastic cost cuts and asset sales in order to recoup investment.

Club Med, which was started in 1950 by former Belgian water polo champion, Gérard Blitz, invented the all-inclusive holiday resorts in France and is today present in 40 countries through its 70 Club Med Resorts, including beach resorts and ski resorts, such as Aime la Plagne in France, Agadir in Morocco, Cancun in Mexico and Kabira in Japan.
 
With annual revenues of more than €1.3 billion, Club Med also operates a number of villas and the Club Med 2 cruise ship as well as offers business conferences hosting services within its resort villages. About 1.2 million people have their vacations at Club Méd resorts every year.

Club Méd plans to strengthen its presence in upscale resorts, by opening five villages between 2010 and 2015. It has already initiated new projects in China, in particular its first Village, a ski resort, in Yabuli, the largest Chinese ski station in north-east China which opened in the winter season of 2010.

Since China could become Club Med's second largest market worldwide in terms of client numbers, Club Med's goal is to attract 5 to 10 per cent of potential Chinese visitors to 4- and 5-star vacation resorts by 2015, representing just 0.2 per cent of the total Chinese population.

According to company's latest figures, of the 25,000 new clients Club Med attracted in 2013, 80 per cent were Chinese, while the rest were Brazilians.

Hong Kong Stock Exchange-listed Fosun, run by chairman Guo Guangchang, has investments in pharmaceuticals, property development, steel, mining, retail, services and strategic investments.

It has annual revenue of more than $8.3 billion.