Thomas Cook chief executive Peter Fankhauser said: "After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the board has chose to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our longstanding shareholder, Fosun, and our core lending banks".
"This comes at a cost, with a significant dilution for existing shareholders", Chief Executive Peter Fankhauser said, adding it was a "pragmatic and responsible solution to secure the future of the Thomas Cook business and brand".
If this collaboration is to be truly effective, Fankhauser alongside the rest of the Thomas Cook Group, need to be fully prepared and ready to accept radical change that is ahead.
It is expected to result in Fosun owning a significant controlling stake in the group tour operator and a significant minority interest in the group airline.
A major cash injection of around £750m would also allow Thomas Cook to gather enough money to trade through to the end of next year and invest.More news: Lil Nas X -"Old Town Road" feat. Young Thug & Mason Ramsey (Remix)
It follows recent reports that Fosun was eyeing up a deal which could lead to the complete break-up of the British travel firm, which is the world's oldest package holiday company.
A "significant amount" of Thomas Cook's external bank and bond debt would be converted into equity, Fosun said.
As a result of the news, Thomas Cook share prices have crashed almost 60%.
Fosun did not say how much of the money it would inject and how much would come from lenders. As a modern global investment company, Fosun may encourage Thomas Cook to enhance booking online, causing even more job cuts and future store closures.
Tour operator bookings were down 9%, though pricing was up 2%.More news: Finsbury Works Reckitt's Record $1.4B Opioid Deal - Thu., Jul. 11, 2019
Shares in Thomas Cook dived nearly 40 percent in early London trade Friday, having risen 20 percent earlier in the week on rumours of a Fosun bid.
Thomas Cook warned earlier this year that the European travel market has become "progressively more challenging", which has led to a dent in its finances and has made it hard to sell its tour business.
A deal would add the tour operator, which had revenue of £7.4 billion a year ago, to Fosun's overseas purchases of brands, including Club Med resorts and Cirque du Soleil.
"Thomas Cook's largest shareholder Fosun is in advanced talks with management over a deal that would effectively hand over the company to the Chinese firm".
Tourism is viewed as key to China's shift towards a more consumption-driven economic model from an investment and export-led one, but buyers like HNA Group and Fosun have faced scrutiny from Beijing for debt-fuelled, big-ticket foreign deals.More news: Amazon Music is now growing faster than Spotify and Apple Music
The proposal is subject to due diligence and further discussion, among other things, Fosun said.