Club Med Management Plans Buy-Out With Largest Investors

Club Mediterranee SA got a takeover bid from shareholders Axa Private Equity and Fosun International Ltd. as they seek to remove the travel company from the spotlight of capital markets to accelerate a turnaround.

The investors offered 17 euros for each share of the French all-inclusive operator, 23 percent more than the May 24 closing price, they said today. Including a convertible bond and debt, the transaction has a size of about 665 million euros ($860 million), a person familiar with the figures said. Company management is also involved in the bid, Club Med said.

Club Med rose as much as 25 percent in Paris, the most in more than two decades. A transaction including debt would be the biggest acquisition of a travel-services company in six years, and would end almost half a century of public listing for Club Med, which started on the Mediterranean island of Mallorca in 1950 in a village made from used military tents.

“I am convinced that together with AXA and management, we have the means to face short-term uncertainties to support the development of Club Mediterranean, in particular in Asia, and consolidate its positions in Europe,” said Qian Jiannong, who manages investment decisions at Fosun’s parent, Fosun Group.

Asian Push

Trading of Shanghai-based Fosun was suspended in Hong Kong today on the release. Club Med rose as much as 3.4 euros to 17.25 euros, and traded at 16.99 euros as of 2:18 p.m.

Paris-based Club Med posted losses in eight of the past 13 years, data compiled by Bloomberg show. Efforts to strengthen the business will intensify, as the French market remains “difficult,” while Club Med will open new villages in emerging economies, according to a joint statement today.

Chief Executive Officer Henri Giscard D’Estaing has unveiled plans to more than double the number of customers in China in three years as wealth in the region grows faster than elsewhere. D’Estaing, the son of former French president Valery Giscard D’Estaing, has led Club Med since 2002 and closed resorts in Europe and expanded in Asia to improve profitability.

The board considers the proposal “friendly” and will nominate a panel to advise on the bid. Fosun, which owns almost 10 percent in the company, has investments in property, mining and drugs. Axa holds a 9.37 percent stake in Club Med.

Holding Structure

Fosun and Axa plan to own 46 percent each of a new holding company that will own the Club Med shares, with management owning 8 percent.

As a reaction to the takeover proposal, the French company’s board has decided to suspend the share buyback program, as well as a liquidity agreement dating back to 2007 with Natixis Securities. The offer is subject to the bidders gaining control of 50 percent of Club Med’s shares.

Travel operators in Europe are restructuring operations as the region suffers the longest recession since introduction of a single currency and competition from the Internet increases.

TUI AG plans to generate 1 billion euros in operating profit by 2015 and resume its dividend as new Chief Executive Officer Friedrich Joussen overhauls Europe’s largest tour operator. Thomas Cook Group Plc announced a 1.6 billion-pound ($2.4 billion) refinancing package earlier this month accompanied by a three-year turnaround plan to improve margins.

Axa Private Equity, Fosun and management were advised by Societe Generale SA.

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