Updated: Norwegian Cruise Line to acquire Prestige Cruise Holdings
Norwegian Cruise Line has announced it will acquire Prestige Cruise Holdings for $3.03 billion in cash, stock and assumed debt.
Norwegian said it will issue more than 20 million shares to help finance the purchase
Prestige includes Oceania Cruises and Regent Seven Seas Cruises.
Prestige shareholders are entitled to an additional contingency payment of $50 million “upon achievement of certain 2015 performance metrics,” a statement said.
Apollo Global Management controls Norwegian through a 20% ownership stake and rights to nominate a majority of the board of directors. Two other partners in Norwegian, Genting Hong Kong and TPG Pacific, have assented to the deal.
Merging Norwegian and Prestige would create a company that can appeal to a broader market swath than Norwegian can on its own, Norwegian CEO Kevin Sheehan said.
“The combination of three distinct brands, each serving a different market segment, under one umbrella immediately creates an industry-leading cruise operator with an unmatched growth trajectory and a portfolio of products that allows us to appeal to guests at every stage of their life cycle,” he said.
After the merger, Frank Del Rio will remain chairman of Prestige Holdings, the statement said. The companies expect the deal to close in the fourth quarter.
In a teleconference, Norwegian CEO Kevin Sheehan said he sees opportunity to use the business model from Oceania and Regent to do a better job of marketing Norwegian’s Pride of America ship in Hawaii. Pride of America is a one-off product with an unusual itinerary, which lends itself to some of the Prestige approach, he suggested.
Sheehan emphasized he has a long list of potential synergies beyond an initial $25 million but that implementing them cannot damage the guest experience. He said the synergies will remain "behind the curtain” and invisible to guests.
The synergies Sheehan identified in the call are in areas such as purchasing, crew recruitment, port relations, fuel and insurance sourcing, maintenance and dry dock contracts and marketing sponsorships and partnerships.
Sheehan said there may also be consolidation of the two shoreside organizations, which are located within five miles of each other in western Miami-Dade County.
Prestige chairman Frank Del Rio, who turns 60 in two weeks, said he was committed to remain with the company through the end of 2015. “After that, we’ll see what happens,” he said.
Del Rio said the Prestige brands are best at executing a good cruise but haven’t been as sharp on cost savings because of the company’s small size.
Sheehan suggested that negotiations with Del Rio over the deal were at times acrimonious. “We had our moments in the negotiation process, but at the end of the day we’ve shaken hands and are best buddies again,” he said.
Sheehan suggested that the $50 million contingency payment was a way of building into the deal the Prestige view of its future performance, while not paying for it upfront in case it proves less than forecast.