With a premium rate as high as 95%, FOSUN TOURISM (01992) plans to privatize through an agreement arrangement, focusing on a stable transition to a light asset model to achieve sustainable growth and maximize Shareholder benefits.

According to the Zhitong Finance APP, FOSUN TOURISM recently announced its privatization plan, intending to repurchase company shares through a contractual arrangement, with a buyback price of 7.80 Hong Kong dollars, achieving a premium rate of 95% compared to the closing price before suspension (i.e., the last trading day). After the privatization plan takes effect, all planned shares will be canceled, and FOSUN TOURISM will apply to the Stock Exchange for the delisting of its shares.

In fact, in recent years, the continuous downturn of Hong Kong stocks has led more and more companies to choose privatization, mainly due to a lack of liquidity, making it difficult for investors to obtain market cap premiums. The company's market cap has been long underappreciated and fails to reflect its intrinsic value, nor can it provide positive value guidance for the company. Choosing to go private and delist offers investors the opportunity to exit with high premiums on one hand, while also allowing the company to focus more on business development to maximize shareholder interests.

In the past five years (2019-2023), the number of companies delisted each year in Hong Kong's Stock Exchange has remained relatively stable, averaging about 57 companies per year, with 53 in 2023 and over 40 already completed in 2024. Among the listed symbols that have undergone privatization and delisting, there are generally good premium rates compared to the last trading day, such as WEIQIAO TEXTILE in January this year with a premium rate of 104.7%, and TRAD CHI MED in February with a premium rate of 34%.

FOSUN TOURISM's 95% premium rate is relatively high, and when looking at the extended holding period, the cancellation price is double the premium rates of 30 days, 60 days, and 90 days, with the premium rates for June 2024 and December 2023 being 2.48 times and 2.9 times respectively. Additionally, from the time the company announces its privatization offer to the final completion of the delisting usually takes 3-6 months. The certainty of the high premium rate also provides investment opportunities for off-market investors. On December 11, the day the company resumed trading, the price increased by 80.25%, with trading volume expanding, closing at 7.21 Hong Kong dollars.

For FOSUN TOURISM, this privatization is a key decision made based on long-term development strategy, allowing the company greater strategic flexibility to avoid the impact of short-term market fluctuations and investor sentiment in the capital markets. At the same time, this will allow the company to allocate resources more flexibly, better completing the transition to a light asset model and focusing on building sustainable growth engines, thus promoting the realization of long-term value.

Since the company first proposed a light asset strategy at the beginning of 2023, it has made significant progress in transitioning from heavy to light assets, continuously increasing the implementation of core brand light asset projects this year.

For Club Med, the resort layout in various Global regions basically adopts a light asset model. By June 2024, out of 67 resorts worldwide, 56 are under leasing and management models, accounting for 85%. In China, all Club Med resorts follow the light asset model. Additionally, destination brands are gradually implementing light asset strategies, such as the Taicang Alps International Resort Phase II project with an investment exceeding 5 billion RMB, funded by the Taicang municipal government platform and managed by the group, marking a new milestone for the company's snow and light asset strategies. In October, the Hainan Super Mediterranean project officially launched, with planning covering a cultural performance center, luxury hotels, crystal lagoons, fashion sports, surfing, and diving among various product formats. FOSUN TOURISM plans to participate in this project using a light asset model.

Currently, the global tourism industry is facing multiple challenges, including increased uncertainty in consumer demand, rising operating costs for companies, and intensified geopolitical risks, while the domestic real estate dividend has nearly diminished. Under this backdrop, where the tourism industry returns to its essence, brand strength, product strength, and IP operation capabilities are the foundation for tourism enterprises. To better cope with the constantly changing market environment, strategic adjustments need to be made more actively and flexibly to achieve long-term sustainable development.

The privatization funds are mainly arranged through internal cash resources or external debt financing arranged by Crédit Agricole, the Hong Kong branch of Société Générale, and Deutsche Bank's Hong Kong branch. The company management stated that after the completion of privatization, the normal operation of the existing Business will be maintained, and there are no plans for significant adjustments to the overall operation of the group. The privatization will make the company's operation more flexible and efficient, helping the company further focus on enhancing core competitiveness and seizing future business opportunities.

Additionally, if the listing status is revoked, FOSUN TOURISM will save costs and expenses related to compliance with public listing requirements. In fact, the company's profitability has been steadily improving, with Club Med's EBITDA margin restored to over 20%, while Atlantis maintains profit resilience, and other projects are making positive contributions. After privatization, under the focus, high-end positioning, and light asset push, profit margins are expected to further increase.

Before the announcement of privatization, most investment banks maintained a bullish attitude, and after the announcement, Lyon still kept its 'outperform' rating and raised the target price.

Overall, FOSUN TOURISM's privatization is not an isolated case; it reflects the current predicament of liquidity shortages in the Hong Kong stock market. If this situation does not improve over the long term, high-quality companies taking the route of privatization and (Delisted) to enhance shareholder value will trigger a wave of privatization. The company's high-premium privatization considers the interests of secondary market investors, allowing an exit at a market cap premium, further focusing on the light asset strategy and enhancing profitability after (Delisted).

With the positive development of the tourism industry in Global and China, FOSUN TOURISM, as a comprehensive tourism leader, is taking this privatization and (Delisted) more as a reluctant choice. However, even after (Delisted), the company still attracts the attention of investment institutions and industrial capital, with hope of returning to the Capital Markets in the future.