Royal Caribbean Cruises to acquire majority stake in Silversea

Silversea chairman Manfredi Lefebvre d'Ovidio (left) and RCCL chairman Richard Fain sign the $1 billion deal.
Silversea chairman Manfredi Lefebvre d'Ovidio (left) and RCCL chairman Richard Fain sign the $1 billion deal.

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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