After years of flirting with the idea, Norwegian Cruise Line last week filed documents with the U.S. Securities and Exchange Commission to take the company public.
The course the third-largest cruise company has followed to an IPO has been long planned but frustratingly elusive.
Rod McLeod, a former NCL executive and now a consultant with McLeod Applebaum & Partners, recalled that when he was at NCL in 1987 as president and COO of parent company Kloster Cruise Ltd., which was publicly traded on the Oslo Stock Exchange, the company got as far as registering to launch in the U.S. But the timing could not have been worse; the Black Monday financial collapse devastated the markets in October 1987, and NCL pulled the plug.
McLeod said the company had planned to file again, but it never did.
Carnival Corp., meanwhile, made its IPO in 1987, and Royal Caribbean Cruises Ltd. went public in 1993.
Over the years, NCL executives continued to talk about taking the cruise line public but never made any serious moves to do so. Whatever the company’s reasons, NCL paid a price for its procrastination.
"They were sorely disadvantaged by not having access to [capital] markets when the largest companies did," McLeod said. "It took its toll on the development of NCL as a business and a brand over the years."
Before Apollo Management acquired half the company and management control, "they didn’t have a story to tell," he said. "They had no basis to go to the market and say: ‘We’re worth buying.’ … Meanwhile, Carnival and Royal Caribbean’s story kept getting better over time."
When the company ordered the Norwegian Epic in 2006, then-CEO Colin Veitch said the ship order, initially for two ships, was part of NCL’s strategy to go public.
"At one stage or another, we’ll be looking for public equity to support our continued growth," Veitch said when the order was announced. "We belong to a large and rather powerful group," he said, alluding to parent company Star Cruises Ltd.
"Not having access to public equity at the moment has not stopped us from going ahead with the continued growth plans," he said.
However, it was only under its current majority owner, Apollo, which in 2007 bought 50% of the company from Asia-based Star (now named Genting Hong Kong), that the company became attractive enough to warrant an IPO.
Before Apollo, NCL had been hemorrhaging money as a result of its U.S.-flagged NCL America operations in Hawaii as well as what the company now describes as serious inefficiencies.
Apollo brought in Kevin Sheehan as CEO in 2008, replacing Veitch.
Sheehan, who had held top posts at Cendant as well as other companies, has been involved with taking several companies public.
In November 2008, NCL reported a quarterly profit for the first time in two years. The company turned a full-year profit in 2009 for the first time since 2005.
The biggest factor in turning NCL’s financial fortunes around was the decision to cut the Hawaii operations from four ships to one. In addition, Sheehan has said that the company took a close look at all its operations and realized it needed to improve the efficiency of its operations, from the supply chain it was using to the way it ran its casinos.
The company also laid off some of its land-based staff and continued its strategy of selling off its oldest ships, such as the Norwegian Dream and the Norwegian Majesty, as well as the former Orient Lines’ Marco Polo. The result was a fleet that NCL claims is the youngest in the industry.
"When you get a private equity firm involved, they want to have a return. It’s as simple as that," Sheehan said in a 2008 interview. "Star Cruises had a much longer view of the world than a private equity firm. [Apollo Management wants] to make sure you’re making progress quarter after quarter.
"There is more of a focus on making headway and improving our margins around the organization now."
It was likely not a coincidence that NCL announced its order for two 4,000-passenger ships the day before submitting the S-1.
German shipyard Meyer Werft will build the 143,000-ton vessels, scheduled for delivery in the springs of 2013 and 2014, at a contract price of approximately $1.7 billion.
Sheehan said the decision to build the ships reflected the "significant progress we have made in improving our operating performance and repositioning the company over the last several years as well as the strong market demand we are seeing for Norwegian Epic and our other ships."
McLeod said that if NCL was successful this time in going public, it would be good for the company and for the industry.
"The fact that NCL wasn’t public has hindered their ability over time to raise capital and therefore to compete effectively," McLeod said. "They need to have that access to capital. It is an important step for NCL in the longer term. … It’s never too late to do the right thing."