RE: Telegraph, just out20 Jul 2019 23:07
Thomas Cook boss Peter Fankhauser is a man in desperate need of a holiday. Like so many of his fellow countrymen of a similar age, the Swiss once looked tanned, fit and youthful but the toll of trying to turn around the struggling tour operator has caught up with the 58 year-old.
Ten days ago, the firm unveiled a £750m rescue deal – its second bailout in seven years – that hands control to Chinese conglomerate Fosun, and Thomas Cook’s lenders.
The complex debt for equity swap had taken months to agree and, although it will be another couple before it is finalised, the restructuring will save one of the travel industry’s most illustrious and oldest names from the scrapheap. Without the rescue, a crippling £1.6bn debt mountain would have forced it under.
While the ink was still drying on the rescue, Fankhauser took to the airwaves to talk up the bailout. Yet despite his valiant efforts, the best he could muster was to describe it as “a pragmatic solution that secures the business into the future”.
No wonder. Sure, one of the industry’s best known brands will live to fight another day, but it will almost certainly emerge from this latest shake-up as a shadow of its former self, dramatically paired back as some sort of psuedo online aggregator of holidays.
There’s no hiding the fact that it is a miserable outcome for a business that pioneered mass tourism and package holidays, has survived both world wars, and been through all manner of takeovers and corporate overhauls, to end up in the hands of its lenders.
In fact, Thomas Cook’s demise has been an exercise in value destruction on a scale few other company meltdowns can match. The malaise stretches back more than a decade and the overall bill runs into the billions of pounds.
First came a disastrous merger with MyTravel in 2007 under Fankhauser’s predecessor-but-one Manny Fontenla-Novoa, a deal that promised to create “an even stronger force” in the travel market, and that old favourite of egotistical, empire-building bosses: “significant value creation”.
The deal was a disaster. Earlier this year, Thomas Cook unveiled yet another profit warning, this time the result of a £1.1bn writedown on the MyTravel takeover.
Incredibly, just a few years later, Fontenla-Novoa doubled-down on his spectacularly stupid bet on the UK high street, merging its travel agency with the Co-op’s in 2011 and doubling the number of high street shops in the group to more than 1,200 just as internet bookings were beginning to take-off.
A financial bailout followed in 2012 and, yet, here it is seven years later having to undergo an even more severe rescue than the last after debts spiralled to a mind-boggling £1.6bn. This time, long-suffering shareholders will almost certainly be wiped out after watching their shares crumble from a high of nearly 300p to less than 5p over the last decade.
As if such a fate isn’t shocking enough, the true financial
Sign In
Follow the stocks
