Norwegian Cruise Line Holdings Ltd. acquired Prestige Cruises International, Inc., parent company of Oceania Cruises and Regent Seven Seas Cruises, for $3.025 billion, including the assumption of debt. The announcement, released on Tuesday, Sept. 2, had been moved up by a day as the deal was leaked.
The move is actually the fulfillment of a plan made seven years ago, and the crown of the turnaround of Norwegian Cruise Line under its CEO, Kevin Sheehan.
In 2007, Apollo Management bought a 60 percent stake in Oceania Cruises and a 50 percent share of NCL Corp (at the time, NCL Corporation Ltd.). Shortly afterwards, Regent Seven Seas Cruises joined Oceania, with Prestige created as the holding company.
Industry buzz was that the three companies would form a three-brand group that could go public. Each has moved in that direction, albeit separately and in different ways: Regent with public bonds, Norwegian with an initial public offering on its own at the beginning of last year and Prestige filing with the U.S. Securities and Exchange Commission this year. Meanwhile, Norwegian experienced a spectacular quality and financial rebirth under Sheehan.
The three brands will keep their individuality, according to Sheehan, who stressed that it is “critically important to keep these brands distinct and intact” in order to preserve their successful appeal.
Sheehan said each business will continue to operate as usual as they conclude the arrangements through this year. Over time, the company will try to build brand loyalty across the group, and all three will benefit from synergies, as well as the sharing of best practices, an increase in economies of scale, greater operational leverage and combined talents. Agent relationships will be preserved.
“It is vital to lead in very cautiously with agents,” said Sheehan. “Each brand has built strong relationships, and these are sacrosanct — the key to success.”
Sheehan expects an initial $25 million in annual synergies, including purchasing and procurement, crew recruitment and port contracts. He also sees future cross-selling opportunities, cross-brand collaboration, cross-business support and joint partnerships.
“Someone might move from Regent to Norwegian and stay in the Haven by Norwegian (an exclusive access complex) if they have family members with them and want all the children’s facilities, for instance,” Sheehan said.
Norwegian has 13 ships in service and four newbuilds on order, with a total of 16,800 berths, for delivery in fall 2015, spring 2017, spring 2018 and fall 2019. Prestige operates eight ships and approximately 6,500 berths under its two brands: Oceania is in the upper-premium segment with five ships, and Regent Seven Seas Cruises is in the luxury sector with three ships. An additional vessel, the 750-guest Seven Seas Explorer, is on order for delivery in summer 2016.
Frank Del Rio will remain CEO of Prestige through 2015, and Sheehan expressed the hope that he will continue beyond, calling him “a genius in the industry.”
Del Rio said that he is seeing the company he “co-founded on my kitchen table” move to “a great opportunity to join an industry titan like Norwegian.” He told TravelAge West that he is absolutely committed to the company through next year.
“I’ll be 61 then, and I’ve done everything I could possibly do,” he said. “I’ll still be young enough to enjoy what I’ve accomplished, and maybe there will be a way to keep involved without the day-to-day commitment.”
He commented that the pundits who are predicting the product will be watered down are the same ones who made that prediction when Regent and Oceania were brought together.
“If anything, the product will be improved, as it was then,” said Del Rio. “Regent is better and stronger than it has ever been in all areas: service, maintenance, dining and expansion.”
He added that Sheehan is an entrepreneur and appreciates the fact that one of the core values of Prestige is the ability to innovate.
Meanwhile, Sheehan called the acquisition “the most exciting moment I’ve had in my tenure here.”
“We are going to be a success story that’s unprecedented, not just in this industry, but in corporate America,” he said.
The Details
Norwegian Cruise Line Holdings Ltd.www.investor.ncl.com
