(Yicai Global) Dec. 6 -- Shares in Caissa Tosun Development and UTour Group plunged today after the two Chinese travel agencies which focus on overseas travel, a sector that has been particularly hard hit by the Covid-19 pandemic, said they will no longer pursue their planned merger due to market uncertainties and other complexities.

Caissa’s share price [SHE:000796] closed down 3.78 percent at CNY7.12 (USD1.12). Earlier in the day it had slumped 7.43 percent to CNY6.85. UTour [SHE:002707] finished the day down 6.68 percent at CNY4.89. Earlier in the day the stock had plunged 9.1 percent to CNY4.76.

The termination will not have an adverse impact on the companies’ operations, nor will it impair the interests of stakeholders, especially small and medium shareholders, both parties said yesterday.

“It is difficult for outbound travel to recover in the short run,” said Zhao Huanyan, chief expert at Huamei Restaurant Management Consulting. This will have an especially big impact on companies like Caissa, so scrapping the merger makes sense. The key now lies in how the two parties will shift their focus to the domestic tourism market which has recovered strongly, he added.

In June the two firms had said they planned to merge through a stock swap, mostly likely to better weather the Covid-19 travel crisis together. Beijing-based Caissa would take UTour private by purchasing its equity at a price of CNY6.89 (USD1) per share, amounting to CNY6.2 billion (USD972.8 million). But the plan was opposed by Caissa’s second largest shareholder HNA Tourism Group which said that the move needs more research.

Both companies are in the red this year. UTour racked up losses of CNY205 million (USD32 million) in the nine months ended Sept. 30 and revenue plunged 64.6 percent CNY476 million (USD74.7 million). While Caissa lost CNY89.3 million over the period and revenue slumped 31 percent to CNY205 million.

Editor: Kim Taylor