Oceania Cruises agreed to be acquired by
Apollo Management, a New York-based private equity firm that is
pledging to grow the three-ship cruise line by enlarging its fleet.
The deal, valued at
$850 million, including the assumption of debt, is expected to
close in the second quarter. It was engineered by former NCL
President and Vail resorts CEO Adam Aron, who became a senior
operating partner with Apollo last year.
Private equity
groups, with billions in buying power, have become a potent force
in the economy and have long been acquiring major brands in lodging
and travel technology.
Apollo itself has
previously invested in Vail Resorts, Wyndham Hotels and RockResorts
and is currently in the middle of an announced acquisition of
Harrah's Entertainment.
But the Oceania deal
marks the first major foray of a private equity group into
cruising.
Oceania said in a
statement that it would remain a wholly independent brand under the
direction of the current management team, led by Chairman and CEO
Frank del Rio and President Bob Binder, who, along with other early
investors, will retain a stake in the company.
Aron said Apollo was
attracted to the cruise industry, and to Oceania in particular,
because of the potential for growth as the baby boomer generation
matures. (See "In the Hot Seat, Adam Aron.")
Both Oceania and
Apollo have suggested that Oceania is poised to take on new
tonnage, especially with the backing of Apollo's $12 billion equity
fund.
"With the tremendous
financial resources of Apollo available to us, Oceania Cruises will
continue to prosper, further strengthen our upper-premium brand
positioning, enhance our award-winning onboard product and be
better positioned for additional growth," said del Rio.
Aron said the line is
capacity constrained, noting that Oceania has sold out most of its
2007 capacity and that bookings are already strong going into
2008.
"Certainly one of the
reasons why Apollo is interested in Oceania is because we believe
Oceania should grow and can easily support growth," Aron
said.
"Everyone at Apollo
has a very high opinion of Frank del Rio and his executive team.
They really are top-notch and have built a very impressive company
in a short period of time, and we have a lot of confidence in them
to lead this effort."
Oceania began
operations in July 2003 and took ownership of the three ships in
its fleet, the Regatta, the Insignia and the Nautica (all former
Renaissance R-class ships) last November. It had been operating
them under a long-term lease from Cruiseinvest.
Industry speculation
about Oceania's future had centered on the possibility that Oceania
would be acquired by one of the three large cruise
conglomerates.
Jim Dolphin, managing
director of AMA Capital Partners, a merchant-banking firm focused
on the transportation industry, said that from Oceania's
perspective there was great advantage to being bought by a private
equity firm rather an existing cruise company.
"I think Frank looked
at Apollo and saw a good partner to grow the company," Dolphin
said. "In a case like this, a private equity player brings a lot of
strength but is also making a bet on management to keep doing what
they are doing. In essence, Apollo has supercharged the Oceania
management and balance sheet to allow them to grow the company and
keep delivering value, including through new-builds."
Dolphin added that
Apollo has a history of investing for long-term growth.
"If you take a look
at Apollo's track record, they are a firm that takes a long-term
view and really helps grow the companies they invest in," he
said.
To
contact reporter Johanna Jainchill, send e-mail to [email protected].