Thomas Cook Stock Still Worth Nothing, Citi Says After Fosun Bid

(Bloomberg) -- Shares of Thomas Cook Group Plc are soaring today after the company confirmed it received an offer for its tour-operator business. But analysts at Citigroup Inc., who slashed their price target for the travel agency to zero pence last month, still think they are worth nothing.

The stock rallied as much as 24% to a high of 20 pence a share after the embattled British group confirmed it received an offer from China’s Fosun International Ltd. for the unit. The stock briefly broke above the level it was trading at before Citi’s James Ainley told clients the shares were effectively worth nothing on May 17, which prompted a 40% selloff that day.

Ainley said in a note on Monday that he still sees no value for current shareholders, unless Fosun pays a “very high” price for the tour operator and/or the group is able to sell its airline at a “much higher than expected value.” Citi thinks a recapitalization of the business is needed, he added.

“Breaking up will be hard to do,” he wrote in the note. The deal would likely need bond holder and lender consent, which may make any disposal impractical unless alternative security or repayment at par was offered.

However, Barclays’ James Rowland Clark said the weekend news reduces uncertainty about the future of the tour operator, particularly as it is not yet clear whether debt will be sufficiently reduced by a sale of the airline for the remaining business to comfortably meet financing requirements. The shares “remain cheap,” he added, maintaining an “equal-weight” rating and a Street-high price target of 46 pence.

Thomas Cook shares were up 13% at 18.2 pence a share at 11.04 a.m. in London.

To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, John Viljoen

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