Stimulated by the announcement of privatization, FOSUN TOURISM (01992) surged after resuming trading in Hong Kong today, with the stock price rising over 80% to HKD 7.21 by the afternoon close.

FOSUN TOURISM had suspended trading since November 27 and only resumed yesterday (December 10) after announcing in a statement that it would repurchase shares in accordance with Article 86 of the Companies Act through a scheme and Delisted its listing status.

The announcement stated that the Board of Directors proposed to repurchase shares through a scheme, offering HKD 7.8 cash per share, which is approximately a 95% premium over the closing price of HKD 4 per share on November 26. After the plan takes effect, FOSUN INTL and SAMSON HOLDING will Hold approximately 98.44% and 1.56% of FOSUN TOURISM, respectively, and FOSUN TOURISM's listing status on the stock exchange will be Delisted.

FOSUN TOURISM is one of the comprehensive tourism groups focused on Leisure vacations, committed to leading the vacation lifestyle and creating a globally leading family leisure vacation ecosystem. The company includes four major business Sectors: 'Club Med and Others', 'Sanya Atlantis', 'Vacation Asset Management Center', and 'Fosun Travel Club and Related Businesses'.

In the first half of this year, Club Med and other businesses contributed approximately 86% of the company's revenue.

Founded in 1950 and headquartered in France, Club Med is the global leader in providing experience-oriented all-inclusive high-end vacations for families and couples. As of the end of June 2024, Club Med operates in over 40 countries and regions worldwide, managing 67 resorts, including 34 resorts (including one cruise) in Europe, Africa, and the Middle East, 12 resorts in the Americas, and 21 resorts in the Asia-Pacific region (including 10 resorts in China). The company's resorts are categorized into owned, leased, and managed contract models.

In the first half of 2024, the direct sales (and semi-direct sales) rate of Club Med's global sales network reached 71.1%, with a global average room occupancy rate of 70.4%, showing growth compared to the same period last year. The average daily bed price was 1,922 yuan, an increase of 8.1% compared to the same period in 2023.

As the global tourism market continues to recover, the company's business has shown steady growth, although uncertainty in the macro economy and localized geopolitical tensions continue to pose challenges to the global tourism industry.

In terms of performance, in the first half of 2024, FOSUN TOURISM generated revenue of approximately 9.415 billion yuan, an increase of 5.8% year-on-year; the corresponding profit during this period was approximately 0.317 billion yuan, a decline from 0.49 billion yuan in the same period of 2023; excluding the one-time income from the disposal of resorts, the profit attributable to shareholders increased by 20.3% compared to the same period in 2023.

Image source: Company’s 2024 interim report.

This year, in addition to FOSUN TOURISM, 15 companies including HAITONG INT'L, BANKOFJINZHOU, VINDA INT'L, YONGSHENG MAT, WEIQIAO TEXTILE, ASIA STD HOTEL, SAMSON HOLDING, and others have been privatized and delisted from the Hong Kong stock market, exceeding the 12 privatizations and delistings for the entire year of 2023.

What exactly is the reason these companies are choosing to privatize and delist?

Unlike situations where the listing status is revoked, privatization and delisting are choices made by companies to actively exit the stock market. Generally, the reasons for privatization and delisting of Hong Kong listed companies mainly include the following points:

1. When a company's stock price is consistently lower than its intrinsic value, major shareholders may believe that the market fails to reflect the company's true value adequately, leading them to choose privatization and (Delisted) to avoid the negative impact of a sluggish stock price on the company's image and financing ability.

2. The company has strategic adjustment plans such as restructuring, mergers and acquisitions, or entering new markets, which may be difficult to implement in the public market environment.

3. Privatization helps the company reduce compliance costs and focus on business development. Particularly when the regulatory environment is tightening and increasing the demands for information disclosure and compliance from listed companies, some enterprises may choose (Delisted) to avoid stock market pressure.

4. Influenced by international situations and policies, some companies in sensitive industries may also choose (Delisted) to avoid international policy risks.

In addition, privatization and (Delisted) also have tax advantages, such as reducing dividend taxes and capital gains taxes, and enhancing the controlling family's control over the company.

Besides privatization and (Delisted), many companies in the Hong Kong stock market have also had their listing status canceled, and there are a few enterprises that voluntarily withdraw from the market.

According to Wind data, as of December 9, 2024, there have been 47 companies delisted in Hong Kong in 2024, among which 30 companies had their listing status canceled, 15 were privatized, 1 voluntarily withdrew from listing, and 1 was redeemed.

It can be seen that the most companies are delisted due to the cancellation of their listing status. When Hong Kong-listed companies perform poorly, experience a deterioration in financial conditions, violate listing rules, or fail to meet resumption guidelines, they may have their listing status canceled. Additionally, some companies may proactively cancel their listing status due to strategic adjustments or business transformations.