Club Med owner is in turmoil. Fosun, a major Chinese conglomerate, which owns dozens of companies in the real estate, financial, tourism and pharmaceutical sectors, is the subject of a warning from its national banking regulator. According to the Bloomberg agency, Chinese financial institutions have received a call to examine their exposure to the Chinese group, which is indebted for 260 billion yuan (37.4 billion euros).
Following the release of Bloomberg information on Tuesday, September 13, Fosun shares plunged 9.6% on the Hong Kong stock exchange on Wednesday September 14 to its lowest level since 2012 before recovering 4% on Thursday September 15. Undermined by the repeated defaults of real estate developers like Evergrande, investor confidence in large Chinese groups is at its lowest this year. But the case of Fosun reveals a risk of contagion to other sectors as well.
Group leader Guo Guangchang promised to sue Bloomberg: “This Bloomberg News false information seriously damaged Fosun,” denounces it in a press release published on the Weibo social network. The company is also downplaying the allegations by presenting the regulator’s recommendations such as “Collection of routine information”.
Purchases across the board, then sales
But, for investors, concerns about the conglomerate’s health were fueled by the sale of the group’s stake in a pharmaceutical company on Sept. 2. Since this announcement, the Fosun share price has lost 18%. Fosun justifies its asset sales with a desire to focus on its favorite sectors. The pharmacy is one of the core activities of the group. The Fosun Pharma subsidiary, for example, distributed the BioNTech vaccine in Hong Kong and Macau. The sale looks more like a desperate ploy to raise money than a refocus by a company that Moody’s says will have to repay 45% of its debt by March 2023.
Fosun looks like the last survivor of a bygone era. Created in 1992 by Guo Guangchang, the group had grown since 2010, multiplying acquisitions in all directions: in a few years the group had bought Club Med, the English football team Wolverhampton Wanderers, or the largest Portuguese bank, Millennium BCP.
To the point of attracting the ire of the authorities, worried about the financial risks assumed by these Chinese giants passionate about acquisitions, such as the promoter Wanda, the insurer Anbang, or HNA, another conglomerate present in dozens of sectors. The latter three have all been dismantled, partially or totally. But, among these qualified groups like “gray rhino” (obvious but hard to contain risks) by the Chinese state media, Fosun was seen as a relatively good student with solid finances.
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