【Record】Mr. Eddie Chen, Managing Director and Head of China & Asia, EURAZEO Gives a Speech in the In-Depth Discussion on "Reorienting Tourism Investment and Recasting the Industry"

Moderator: Distinguished guests, panelists will conduct an in-depth discussion on "Reorienting Tourism Investment and Recasting the Industry". Three parts will be included, such as self-introduction, Q&A and a short summary section.

The first section is about self-introduction. Please briefly introduce yourself and the institution that you are working for. Besides, your feeling and expectation towards the conference should be given. All these should be stated in 2 minutes.

Mr. Eddie Chen, Managing Director and Head of China & Asia, EURAZEO

Eddie Chen: Dear guests, I’'m from EURAZEO. Our headquarter is in Paris, France. At present, our offices station in Shanghai and New York. Our company is an investment institution strategically focusing on cross-border mergers and acquisitions. With a history of 141 years, the company has invested in nearly 430 companies in various industries around the world. The amount of investment is nearly 20 billion Euros. We have paid attention to and are willing to invest in tourism. At present, we have invested in some significant tourism-related programs. For example, we own the world's second-largest provider of a tax reimbursement. In addition, the company has acquired a hotel management school in Swiss among the world's top charts. Therefore, our company might be more interested in service providers supporting the industrial chain behind the scene. Such providers might be able to remain stable in the business cycle. In China, we have also invested in plenty of project related to tourism management. I'll expound in the next section. Thank you!

Moderator: Now, let's give the floor to our fifth guest, Mr. Eddie Chen, Managing Director and Head of China & Asia, EURAZEO. You've been working in the U.S., Europe, and the UN for more than 30 years. You're experienced in diplomacy, finance, investment and high-tech and have unique points of view. I'd like to ask you two questions. Firstly, what's the pandemic's influence on global tourism investment and cross-border mergers and acquisitions? Secondly, I’ve noticed that the fund under your guidance is jointly established by EURAZEO, the oldest fund management company in Europe, China Investment Corp and BNP Paribas. The fund has invested largely in medical and health care, which will affect the world medical tourism. Could you please share your suggestions on the future cross-boarder medical tourism investment and cooperation?

Eddie Chen: Thank you, Mr. Li. As for the first question, I notice that other guests have expounded from different perspectives. I have some special opinions.

There are some features from the perspective of cross-border mergers and acquisitions. Firstly, it's better to hold shares. Secondly, management after purchase is required to be strict. Thirdly, profits should be given priority to. Technically, projects drawing cross-boarder investment institutions won't be dodgy under normal circumstances. In 2019, cross-border mergers and acquisitions were prosperous in Asia, Europe and North America. For example, EURAZEO browsed through over 600 quality programs which were in the field of cross-border mergers and acquisitions. We carefully studied 70 to 80 programs which were from various industries. Programs from service industry included tourism, education, health care and high-tech. The point to answer the first question lies in investors' preferences. I'd like to share with you my first opinion.

From this perspective, we pay more attention to the upstream and downstream companies of industrial chains. We not only look into tourism, but also keep an eye on upstream and downstream industries. For example, we've acquired a hotel management school, two of the world's greatest brands, the world's second-largest provider of tax reimbursement as I mentioned before. In addition, we have taken over the world's largest institution of study tours. As we all know, study tours bring tourists. This institution will provide services for 500 thousand students. A student has a parent at least, which means 500 thousand tourists. The parent might send his/her child to study abroad in the U.S., Europe, or Central and South America. After that, the parent might start travelling. Therefore, we prefer professionals who have worked for various types of business or share the same principle with us that an institution can't work on tourism only for tourism's sake under normal circumstances.

COVID-19 has broken all rules, investment principles, companies' strategies to withdraw and manage net income. We have realized how to address challenges when facing special disasters. From this perspective, I don't worry about the pandemic's influence on cross-border investors, for we focus on a project’'s long-term development. Normally, we'll withdraw our cash after 5 to 6 years. The epidemic might affect tourism in 1 to 3 years but won't influence our views on the industry. However, we should cautiously study and handle its short-term development from the micro-level perspective. After all, we should come down to earth to earn our living. This is the major issue we are facing now.

In short, we will attach greater importance to industries that might be able to remain stable in the business cycle. In particular, investors are optimistic about health care and online service during the pandemic. The outbreak has prospered online service.

Secondly, investors pay more attention to a company's profitability and cash flow management no matter the company is large or small and no matter what phase it is in. Profitability and cash flow management are vital for a company if it tries to draw investors' attention, especially when the economy is balanced on a knife-edge.

Thirdly, I repeat that a company needs to extend its businesses to upstream and downstream industries and adjust its businesses to attract investors. For example, does your company cooperate with upstream and downstream companies in the industry? Can you find a prominent partner? We can't require a tourism company to be omnipotent. The company should focus on some competitiveness. In addition, it should be able to connect other companies horizontally and comprehensively. Therefore, such tourism companies will draw investors.

As for the second question, I'd like to present my second opinion, which might be slightly different from the question. Innovation is crucial. All industries, including tourism and investment, should be innovated. We have set up France-China Cooperation Fund in collaboration with China Sovereign Wealth Funds, China Investment Corporation, and BNP Paribas. The fund was launched last year, and it began to invest in April this year. Managed by EURAZEO, this fund has 1 billion euros. It is a bilateral fund supported by countries, which is distinct from common funds. However, it applies market-oriented management because it is managed by EURAZEO only. We invest in high-end and outstanding hidden champions in Europe, but those companies should be able to enter the Chinese market. That means the companies should adapt their products to the Chinese market and empower China. The fund of 1 billion euros is the target, which is an innovative model. The outbreak has impacted global trades. Some trades were cancelled or delisted, and some vanished, others under negotiation ceased. However, we started investing in April. Until the end of July, we have invested in two programs. We acquired a Dutch provider of an ophthalmic surgical device who is the hidden champion in the industry. The device has an enormous market in China, but it was rarely seen in our country before. Therefore, we speed up to find the entrance to the Chinese market for the device, plan to sale it and set up an example in China. Ophthalmic surgery is a valuable industry. In addition, we acquired a French company specializing in automotive inspection and testing in July. As the provider of such services for the world’'s most important seven-car enterprises, the French company is also the hidden champion in its industry. It has a history of 50 years. In 2020, France-China Cooperation Fund will complete two outstanding programs, which is an innovated mode. China’'s rigid demand still exists, while Europe has fine technology or products. We can combine supply with demand. Our capital market and investors will play a leading role. In the end, it will pay off and leave a sound market for the program we have invested in when we withdraw in the future.

Tourism has been shattered. Those companies which can't hold on will go bankruptcy. After the economy recovers in the next year, a bunch of new enterprises will emerge. How do investment institutions view those new tourism companies? In conclusion, we should pay attention to their ability of innovating forms of business in tourism. We shouldn't ignore new types of business. Moreover, those new types can offer new products, such as tourism, in combination with mid- and high-end business travelers. For example, we acquired a hotel management company a few years ago. The company owned more than 100 asset heavy hotels in developed countries in Europe. We transformed them into boutique hotels which provided services for mid- and high-end business travelers. The group is prosperous this year, because other four-star or five-star hotels targeting ordinary tourists have been hit hard by COVID-19. However, business travelers should go on business trips and have meetings, if possible. "Tourism plus Business Travelers" is a new model. Tourism can be in combination with education. As I’'ve mentioned, institutions providing study tour services before, study tours will bring tourists. Children study abroad, while parents go on trips. We should break the rules. Tourism professionals need to seek innovative product planning horizontally in the industrial chains and produce such products. I’'m convinced that companies, which are preferred by the capital market and can attract investment, have such abilities. Last but not least, such companies should structuralize their capital, form full structures, enter the capital market quickly, receive financing as soon as possible, and avoid becoming enterprises which conduct simple behaviors. That's all. Thank you!