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Top Investors Seek to Buy Club Med in $700 Million Deal

Monday, 27 May 2013 | 6:11 AM ET
Club Med in Grecolimano, Greece
Yannis Kontos | Bloomberg via Getty Images
Club Med in Grecolimano, Greece

Club Mediterranee (Club Med)'s top shareholders plan to make a bid valuing the French holiday firm at around 541 million euros ($700 million), seeking to accelerate its shift to fast-growing emerging markets and away from recession-hit Europe.

Chinese investor Fosun International and AXA Private Equity said on Monday they would team up with management to offer 17 euros a share for the stock they do not already own - a 23 percent premium to Friday's closing price.

Founded in 1950 and listed since 1966, Club Med was a pioneer of the all-inclusive holiday resort.

But it fell on hard times earlier this century amid stiff competition and an unsuccessful expansion into services, and its more recent drive to recast itself as an upmarket operator has been hampered by a flagging European economy.

One Paris-based trader, who declined to be named, said the involvement of China's Fosun in the offer could help Club Med's chances of succeeding in that country.

"This generous friendly bid has great chances of success. The management always made clear it has great plans to develop in China and was clearly seeking a business partner, " he said.

"The fact that the management would remain in place and the presence of a French institutional (AXA) in the deal is also making the bid easier to accept."

Club Med shares were up about 23 percent to trade around the proposed 17 euros offer price. The stock has recovered from below 8 euros in 2009, but is well short of its 2007 high of almost 50 euros.

Club Med, which operates around 70 resorts, said it would appoint a committee of independent directors to assess the offer, which is expected to be filed in the next few days.

Fosun first invested in the French company in 2010 and Club Med reiterated on Monday it hoped to make China its second-biggest zone after France by the end of 2015.

Weak Europe

The bid proposal comes as travel firms and airlines across Europe have seen bookings fall in recent months.

Club Med said on Monday operating income at its holiday villages in the first-half ended April 30 fell 6.4 percent.

Bookings in Europe over the last eight weeks were down 4.6 percent, mostly due to a weak French market, while they jumped 13.9 percent in Asia. Net debt at the end of April stood at 112 million euros, down from 123 million a year ago.

Club Med competes with global hoteliers such as Intercontinental and Accor, as well as tour operators such as TUI Travel and Thomas Cook.

The move does not necessarily signal a new wave of takeovers In the sector, according to Christian Jimenez, who heads the Diamant Bleu Gestion fund.

This is "a very specific takeover," he said. "Fosun was already in the capital and intended to raise its stake and Club Med's management backs the deal."

AXA Private Equity currently holds 9.4 percent of Club Med, while Fosun owns 9.96 percent.

Club Med Chief Executive Henri Giscard d'Estaing, who became CEO in 2002 and has spearheaded Club Med's upmarket shift, is also taking part in the deal.

Giscard d'Estaing currently owns less than 0.01 percent of the share capital. He will remain CEO if the takeover goes ahead, with Michel Wolfovski also continuing to be deputy CEO.

Should the buyers secure 95 percent of Club Med, they reserve the right to squeeze out other shareholders.

Societe Generale is advising AXA Private Equity and Fosun on the deal.

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