The cramped flights and family quarrels mean the all-inclusive holiday is not for everyone. That is not the case for Fosun, however. China’s largest private conglomerate has made a friendly offer for France’s Club Méditerranée, along with a consortium including Paris-based Axa Private Equity and the holiday group’s management. The offer looks timely as Club Med comes under pressure from a struggling French holiday market and is restructuring in a push to become more upmarket.
The consortium has offered €17-a-share, or a 24 per cent premium to Club Med’s undisturbed share price. That looks generous but then some investors such as Rolaco Holding, have been buying shares since 2003 when shares were trading more than €100. They may, therefore, want to extract more from the consortium before approving the buyout.
It is difficult to find a similar peer to help value Club Med. Unlike travel agents, the French resort group manages the holidays it sells. The high asset base this model affords – it owns a third of its resorts – also makes it hard to cut capacity when the market slows. France still makes up almost half of the group’s sales, yet the holiday market there is shrinking in the high single-digits each year. The consortium’s offer values Club Med on an enterprise value of six times forecast earnings before interest, tax, depreciation and amortisation. This looks reasonable against likes of Tui Travel, which trades on 7 times, but cheap against Accor the French hotel group which trades on eight times.