Norwegian Cruise Will Buy Rival Prestige to Expand Business and Catch Up to the Competition

By Nicholas Luciano,
Money and Investing Writer

Norwegian Cruise Line (NASDAQ:NCLH) has announced this past week that they will buying a rival private company, Prestige Cruises International for $3 billion in cash and stock. The stock portion consists of 20.3 million shares of common stock of Norwegian valued at $670 million.

Norwegian could end up paying an additional $50 million to Prestige shareholders depending on certain financial goals and metrics met before the deal is expected to close at the end of this year.

Prestige Cruises is the parent company of Ocenia Cruises and Regent Seven Seas Cruises.
The company believes that being acquired will give it much more success in the market instead of going through an initial public offering.

Apollo Global Management which owns about twenty percent of Norwegian has agreed to the deal, as well as Genting Hong Kong Limited and TPG Capital who both own eighteen percent.

The deal is expected to double earnings in the next three years for Norwegian and constitute $25 million in initial savings.
“The acquisition of Prestige represents an extraordinary opportunity for Norwegian Cruise Line to expand our market presence by adding two established, award-winning brands in the upscale cruise segment with loyal followings,” Norwegian CEO Kevein Sheehan said in a statement when asked about the deal.

He also believes that it will help cross business support, better branding and partnerships, and ultimately add to long term shareholder value.

Currently, Norwegian has thirteen ships that can hold up to 5,000 passengers. Oceania has five ships and Regent has three that will be added to the Norwegian fleet but their luxury high priced ships hold between 490 and 1,250 passengers.
Another positive for Norwegian is that it just finished building its two newest ships, the Breakaway and Getaway, which are two of the largest in the world.

It also plans on releasing four more vessels over the next four years. In order to compete with top competition like Carnival which owns 100 ships and Royal Caribbean with 42, Norwegian will have 21 by the end of the deal.

Carnival made $15.5 billion in revenue over fiscal year 2013 and Royal Caribbean brought in $8 billion.

Norwegian on the other hand only made $3.8 billion in revenue which it looks to definitely increase with the acquisition of Prestige.

Oceania and Regent serve 330 ports across the globe and the markets for smaller luxurious ships is experiencing positive growth due to the older retiring baby boomer generation.

Shares for Norwegian have been up 75 percent since its first IPO in January 2013 and recently went up ten percent this week with the announcement of the deal.

Norwegian is hoping to reestablish itself as a global leader in the cruise line industry by taking a little bit different business strategy approach than Carnival or Royal Caribbean.

The deal should bring about promising prospects once all the regulatory aspects are taken care of by the end of 2014.

A version of this article appeared in the Tuesday, Sept. 9 print edition.

Contact Nicholas at
nicholas.luciano@student.shu.edu

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