China's Fosun International Ltd. looks set to secure a deal to buy French holiday resort operator Club Méditerranée SA which would end a two-year pursuit that has underscored the Chinese investment conglomerate's emergence as an international dealmaking force.
Fosun, controlled by Chinese billionaire Guo Guangchang, is expected to win the backing of Paris-based Club Med this week, after Italian financier Andrea Bonomi and partner Kohlberg Kravis Roberts & Co. LP declined to top the Chinese company's latest offer of €24.60 per share.
Bonomi on Friday, Jan. 2, said he couldn't justify increasing his offer of €24 per share, clearing the way for the Fosun takeover, which values Club Med at €939 million ($1.1 billion). Club Med's board, which has repeatedly backed Fosun's offers, is expected to deliver its support for the Chinese company within days.
The acquisition of Club Med will be Hong Kong-listed Fosun's highest-profile deal, but forms only part of a two-year spending spree that will top $5 billion once the holiday operator is secured.
The Club Med acquisition is an outlier in Fosun's recent dealmaking. The loss-making resort operator is a turnaround investment predicated on Fosun's ability to expand its operations in the Chinese market. Fosun's acquisitions over the past two years have focused on been weighted towards the insurance sector, in order to secure an asset base that can be leveraged to fund further deals and ease Fosun's reliance on bank financing.
Fosun on Dec. 30 agreed to pay $433 million for Michigan-based Meadowbrook Insurance Group Inc., establishing itself for the first time in the U.S. property and casualty insurance market. "The group regards the development of insurance business as a major approach to access long-term high-quality capital," Fosun said in a filing to announce the deal.
Fosuns biggest insurance deal came in January 2014, when it paid €1 billion for an 80% stake in Fidelidade CS, the insurance unit of Portugal's Caixa Geral de Depositos SA. That deal also highlighted Fosun's willingness to go head-to-head with more established investors. The Chinese investor outbid New York's Apollo Global Management LLC to win Fidelidade in an auction run by the Portuguese government.
Guo wasted little time in putting his new asset to work. In October, Fidelidade was used as the bid vehicle when Fosun paid €479 million for Portuguese hospital operator Espirito Santo Saude SGPS SA. Fidelidade was also roped in as a partner in Gaillon Invest II, the bid consortium put together to acquire Club Med.
Guo, whose personal wealth is estimated at about $4.3 billion by Forbes, has said that insurance will be Fosun's core business. He has also said that he models his investment strategy on Warren Buffett, claiming he will invest in any company where he sees long-term value and the opportunity to benefit from "combining China's growth momentum with global resources".
That has made Fosun an eclectic buyer. In October, it sunk $200 million in Hollywood's Studio 8 Holdings LLC, a movie production startup founded by Jeff Robinov, a former president of Warner Brothers Motion Pictures. Fosun already owns almost 21% of U.S.-listed, China-based film distributor Bona Film Group Ltd., which has said that it will seek opportunities to work with Studio 8 to distribute its films.
Fosun insists that Club Med's future is in China and in meeting wealthy Chinese consumers' growing appetite for upmarket resorts. Club Med managers, who have been offered a stake alongside Fosun in the Chinese company's bid, evidently agree. The company, which operates three resorts in China, plans to open five new Chinese resorts by the end of this year, making China its No. 2 market after France.
Shares in Club Med traded Monday at €24.50, down €0.59, or 2.4%, on their Friday close. Fosun International shares closed on the Hong Kong exchange at HK$10.66, up HK$0.30, or 2.9%. Fosun has a market capitalization of HK$73.7 billion ($9.5 billion).
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