Royal Caribbean Cruises to acquire majority stake in Silversea

Royal Caribbean Cruises to acquire majority stake in Silversea

Royal Caribbean Cruises Ltd. (RCCL) will pay $1 billion to
acquire a 66.7% stake in Silversea Cruises, in the most far-reaching
acquisition in the cruise industry in over a decade.

The combination will give RCCL a true luxury brand for the
first time, as well as an instant competitor in expedition cruising, a segment
poised for growth but also for significant new competition.

By selling majority control to RCCL, Silversea gains a large
public company’s deeper access to capital. It will also will be able to
piggyback on RCCL’s broad distribution system and cherished ties to travel
agents.

The deal, expected to close later this summer, gives RCCL
for the first time a complete stable of brands from the entry-level
contemporary Royal Caribbean International to premium line Celebrity to
high-end Azamara Club Cruises to top-of-the-line luxury Silversea.

“We can offer a more complete portfolio of brands,”
RCCL chairman and CEO Richard Fain said in an interview.

RCCL’s two largest competitors, Carnival Corp. and Norwegian
Cruise Line Holdings, already have luxury brands, owning Seabourn and Regent
Seven Seas Cruises, respectively. 
Neither operates in the expedition niche, however. Celebrity has a small
expedition arm.

Silversea was founded in 1994 by the Lefebvre family of
Monaco and is controlled by Silversea chairman Manfredi Lefebvre d’Ovidio. It has five
luxury ships, with another on order for 2020, and four expedition vessels.

After the investment, Lefebvre will continue as executive
chairman of Silversea, which will operate as an independent brand of RCCL, Fain
said. There may be personnel synergies, he said, but the company does “not
expect there to be major layoffs.”

RCCL said the deal assigns an enterprise value to Silversea
of $2 billion. RCCL is about ten times larger, with a market value of $22.9
billion.

RCCL said it would use debt to finance the deal. In addition
to the purchase price of about $1 billion, it could issue Lefebvre another
472,000 shares of RCCL stock, contingent on achieving 2019-20 performance
metrics.

The stock would be valued at about $51 million at the
current RCCL price of about $108 a share.

In addition to brands it owns outright, RCCL has joint
ventures to operate two brands in Europe — TUI Cruises and Pullmantur. Lefebvre
said that RCCL’s track record of success in those two ventures was a factor in
his choice of RCCL as a partner.

The deal is the first $1 billion acquisition in the cruise
industry since the $3.025 billion consolidation of Prestige Cruise Holdings into
Norwegian Cruise Line in 2014. However, both of those companies had the same
controlling shareholder — Apollo Global Management.

Before that, the biggest cruise deal was the $7.3 billion
purchase of P&O Princess Cruises by Carnival Corp. in 2002. In 2015,
Genting Hong Kong acquired Crystal Cruises for $550 million.

Recently, the cruise industry has been adding brands rather
than subtracting them. Richard Branson is laying plans for Virgin Voyages to
begin sailing several 2,700-passenger ships starting in 2020, and the
Ritz-Carlton hotel chain along with a private equity partner plan to debut a
298-passenger luxury ship in Fort Lauderdale in time for the 2020 Super Bowl.

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