Fosun, AXA win Club Med with higher bid

The Chinese conglomerate and private equity bidder have increased their offer after shareholders declared the original price was too low.

Struggling French resort operator Club Méditerranée has accepted an increased offer from Fosun International, AXA Private Equity and company management to buy all outstanding shares, according to a statement from the Paris stock exchange.

Chinese powerhouse Fosun and the European private equity firm increased their offer in late June to €17.50 per share, which is equal to a total bid of €557 million. 

The new bid comes after shareholders deemed the pair’s previous offer as too low. In late May, they offered €535 million for all shares and securities in the business, which was subject to approval from an independent board of directors. The offer equaled a price of €17 per share, representing a premium of 28.4 percent over the company’s average share price during a 30-day trading period.

The company’s board and top shareholders expressed support for the new bid, according to the statement. 

Fosun has been a partial investor in Club Med since 2010, when it invested alongside cross-border firm A Capital. The firms acquired a 7.1 percent stake in the business, which was later increased to 10 percent, and had a strategy to expand the operations into China. 

I am convinced that together with AXA Private Equity and the current management, we have the means to face short-term uncertainties to support the development of Club Méditerranée, in particular in Asia.

Jiannong Qian, general manager, Fosun International

Club Med has faced difficulty as Europe’s tourism market continues to be strained. In an earlier statement, the buyers identified expansion into emerging markets as a key focus to save the ailing business. 

Jiannong Qian, general manager of Fosun, said earlier, “The last three years have given us the opportunity to know and appreciate the company as well as the skills of its managers. I am convinced that together with AXA Private Equity and the current management, we have the means to face short-term uncertainties to support the development of Club Méditerranée, in particular in Asia, and consolidate its positions in Europe.” 

Cross-border M&A with Chinese strategics has picked up significantly recently. During 2012, $5.9 billion worth of private equity-backed cross-border deals closed, representing a 61 percent increase over the $3.6 billion in deals closed during 2011, according to data from Thomson Reuters.

However, industry sources note that these deals are not without risk and many groups end up overpaying for assets. 

In particular, take-privates of Chinese companies listed on US stock exchanges have been criticised as being overpriced. 

Derek Sulger, managing partner at Lunar Capital, commented recently, “The main thing I have concerns about in addition to due diligence, is any deal can be a great deal, but not at too high a price, and I have yet to see one of these [privatisation] deals done at a reasonable price,” he said. 

For example in May, CITIC Capital completed an $890 million buyout of NASDAQ-listed AsiaInfo Linkage, paying a 53 percent premium on its 30-day trading average, according to a joint statement. Shortly after, The Blackstone Group offered $662 million to take private Pactera Technology, the bid representing a 43 percent premium on its share price before the deal went public, according to a Pactera statement.