RCCL teams with Euro operator

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MIAMI -- Royal Caribbean Cruises Ltd. became the latest major cruise company to expand its ties to the European passenger market by forming a joint venture with First Choice Holidays, the U.K.'s third-largest tour operator.

The joint venture will include the formation of a new Europe-based cruise line, company officials said.

The agreement comes a week after P&O, cruising's third-largest line, agreed to purchase Festival Cruises, one of Europe's largest cruise operators.

First Choice serves more than 4 million customers annually through several brands, and also operates a charter airline.

Under terms of the deal, Royal Caribbean will buy about $297 million in convertible preferred stock, representing a 20% interest in First Choice. The agreement is subject to approvals from U.S. and U.K. regulators and First Choice shareholders.

For Royal Caribbean, the deal creates a new source of U.K. passengers for its Celebrity and Royal Caribbean International brands.

"We are convinced the alliance will create significant new demand for our brands," said Richard Fain, Royal Caribbean's chairman.

First Choice, meanwhile, will receive an infusion of cash, which company chairman Ian Clubb said will fund opportunities in the consolidating European tour operator business.

First Choice is itself considered ripe for acquisition by another European tour company. Clubb said First Choice is "open" to takeover talks.

"We want to take part in the consolidation process," he said.

As part of the joint venture, Royal Caribbean's 1,500-passenger Viking of the Seas will become the first ship in a new cruise line targeting Europe's mass market, with Mediterranean and Caribbean itineraries beginning in 2001. The new company will start with a $100 million valuation, with each party contributing $50 million.

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