NCL Reports It Has Agreed to Purchase PCH

Market Pulse Norwegian Cruise to buy Prestige Cruises in deal valued at $3.03 billion

Published: Sept 2, 2014 8:11 a.m. ET

By

TomiKilgore

Reporter

NEW YORK (MarketWatch) -- Norwegian Cruise Line Holdings NCLH, +0.36% said it has agreed to buy upscale cruise provider Prestige Cruises International in a cash and stock deal valued at $3.03 billion, including debt. Prestige is the parent company of Oceania Cruises, which operates five ships, and Regent Seven Seas, which operates three ships. "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," said Kevin Sheehan, Norwegian's chief executive. Norwegian's shares were still inactive in premarket trade Tuesday. Through Friday, the shares have lost 6.1% year to date, while the S&P 500 has gained 8.4%.

I wonder if it if final...they imply it is.

It will be an interesting combination. No one can know the outcome, but this is the way of the world...build a brand and sell when it is finanancially beneficial.

Even though I usually go Oceania...and have a lot of Norwegian under my belt, I can see that there will be minor...and possibly major changes for both lines. We will all just have to wait and see.

When you reflect on this, it is obvious that there is not much choice left to any of us in the market right now.

Done deal...

"...Our complementary strengths and skillsets will pave the way for new cross-selling opportunities, cross-brand collaboration, cross-business support, as well as joint partnerships which, coupled with meaningful synergies that can be quickly implemented, will provide solid accretion to earnings per share and drive long-term shareholder value," added Sheehan."

Here comes the blender. Tread softly, Kevin. :o

Not thrilled, but as Caroldoll says, it is the way of the world. Not anything we can do about it, so we will see what happens I suppose.

[quote name=

"...Our complementary strengths and skillsets will pave the way for new cross-selling opportunities, cross-brand collaboration, cross-business support, as well as joint partnerships which, coupled with meaningful synergies that can be quickly implemented, will provide solid accretion to earnings per share and drive long-term shareholder value," added Sheehan."

[/quote]

And a partridge in a pear tree..;)

Just heard this too :(

Sent from my iPhone using Forums

I find this unsettling. Our next cruise is in November. Doubt that it will be done by then. Have to see what we do about August 2015 we have booked.

Though technically it was Kloster that bought and destroyed the two wonderful lines mentioned above it was all controlled by NCL. I hope they don't repeat history.

Here's a copy of a letter sent by NCL to travel agents. (NCL Letter) It says NCL, Oceania and Regent will be kept separate. Time will tell.

Here's a copy of a letter sent by NCL to travel agents. (NCL Letter) It says NCL, Oceania and Regent will be kept separate. Time will tell.

Cruise critic article says the same thing. Tried to post the link but couldn't get it to work. :confused:

Cruise critic article says the same thing. Tried to post the link but couldn't get it to work. :confused:

http://www.cruisecritic.com/news/news.cfm?ID=5968

Why so negative? I suppose that it is the fear of change? Goodness -- on the Oceania board they talked about NCL waiting to change the names of Regent's ships, merging Regent and Oceania (again -- you would think that this rumor would have ended years ago) and similar nonsensical predictions. IMO Ray Solaire would say "RUBBISH".

As I mentioned on the other thread, I am a bit concerned about the Navigator but really do not think anything else will change -- at least not for a few years. As long as FDR remains the head of our cruise lines, I'm confident that Regent and Oceania will continue to be as wonderful as they have been in the past.

Here is a bit more detail:

Norwegian Cruise Line Holdings Ltd. Agrees to Acquire Prestige Cruises International, Inc. for $3.025 Billion

Acquisition immediately accretive to earnings without synergies; initial $25 million of synergies will result in high single-digit percentage adjusted EPS accretion

Combination results in a diversified cruise operator with leading global cruise brands across market segments

Transaction enhances already best-in-class financial metrics

MIAMI, Sept. 2, 2014 (GLOBE NEWSWIRE) -- Norwegian Cruise Line Holdings Ltd. ("Norwegian Cruise Line" or "Norwegian," (Nasdaq:NCLH)), a leading global cruise operator, today announced it has entered into a definitive agreement to acquire Prestige Cruises International, Inc. ("Prestige"), the market leader in the upscale cruise segment and parent company of Oceania Cruises and Regent Seven Seas Cruises, in cash and stock for a total transaction consideration of $3.025 billion, including the assumption of debt.

"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," said Kevin Sheehan, Norwegian Cruise Line's chief executive officer. "Not only does this acquisition immediately enhance our financial performance, but it also deepens the bench of talent that we have been developing over the years. Our complementary strengths and skillsets will pave the way for new cross-selling opportunities, cross-brand collaboration, cross-business support, as well as joint partnerships which, coupled with meaningful synergies that can be quickly implemented, will provide solid accretion to earnings per share and drive long-term shareholder value," added Sheehan.

"We are excited to become part of the Norwegian family and start a new chapter for our company," said Frank Del Rio, chairman and CEO of Prestige. "With Oceania and Regent, we have built iconic brands with distinctive product offerings and strong customer loyalty. The combination is very compelling and will allow us to further enhance our renowned guest experience. We are looking forward to joining the Norwegian team and building upon the success that our three brands have already achieved."

Prestige operates eight ships and approximately 6,500 berths under two segment-leading brands. Oceania Cruises is the market leader in the upper-premium cruise segment with five ships offering destination-oriented cruise vacations to more than 330 ports around the globe, gourmet culinary experiences, elegant accommodations and personalized service. Regent Seven Seas Cruises is the market leader in the luxury cruise segment and operates three award-winning, all-suite ships, with an additional ship on order for delivery in summer 2016. Regent offers the industry's most inclusive luxury vacation experience visiting over 250 destinations worldwide. Frank Del Rio will remain chief executive officer of Prestige.

"The combination of three distinct brands, each serving a different market segment, under one umbrella immediately creates an industry-leading cruise operator with an unmatched growth trajectory and a portfolio of products that allows us to appeal to guests at every stage of their life cycle," added Sheehan. "We are fully committed to retaining the brand propositions, guest experiences and cultures of the Norwegian, Oceania and Regent brands that have allowed each to realize such success."

Transaction Rationale

The compelling rationale to acquire Prestige includes:

The diversification of cruise market segments by adding upper premium and luxury brands;

The further enhancement of industry-leading financial metrics;

Opportunities for synergies and the sharing of best practices among brands;

An increase in economies of scale providing greater operational leverage;

The expansion of growth trajectory and global footprint; and

The opportunity to complement Norwegian's new build program with the existing Regent order that provides measured, orderly capacity growth through 2019.

Transaction Details

The total transaction consideration of $3.025 billion includes the assumption of debt. Additionally, a contingent cash consideration of up to $50 million to Prestige shareholders would be payable upon achievement of certain 2015 performance metrics.

In early July, Norwegian's Board of Directors formed a Transaction Committee and delegated it full authority to negotiate and approve a transaction. The Committee consisted entirely of disinterested directors. Genting Hong Kong Limited and certain funds affiliated with TPG Capital, each of whose consent was required pursuant to Norwegian's existing shareholders' agreement have consented to the transaction. The Transaction Committee, who retained its own financial and legal advisors, has unanimously approved the transaction. The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter of 2014.

Norwegian will finance the acquisition with existing cash, new and existing debt facilities and the issuance of approximately 20.3 million shares of its common stock. Pursuant to the requirements of NASDAQ Rule 5635, holders of a majority of Norwegian's common stock have consented to the issuance of such shares.

Barclays is acting as lead financial advisor to Norwegian, Deloitte Consulting, LLP is acting as diligence advisor and Weil, Gotshal & Manges LLP is providing legal counsel. UBS Investment Bank is acting as financial advisor to Prestige and Paul, Weiss, Rifkind, Wharton & Garrison LLP is providing legal counsel. Perella Weinberg Partners is acting as financial advisor to the Transaction Committee of the Norwegian Board of Directors and Cravath, Swaine & Moore LLP is providing legal counsel. J.P. Morgan Securities LLC and Deutsche Bank are also serving as financial advisors to Norwegian. Barclays, J.P. Morgan Securities LLC and Deutsche Bank have provided committed financing to Norwegian to support the acquisition.

__________________

Done deal...

 

 

"...Our complementary strengths and skillsets will pave the way for new cross-selling opportunities, cross-brand collaboration, cross-business support, as well as joint partnerships which, coupled with meaningful synergies that can be quickly implemented, will provide solid accretion to earnings per share and drive long-term shareholder value," added Sheehan."

 

Here comes the blender. Tread softly, Kevin. :o

Sorry that I have been away - I am on a very tight work deadline, put popped in to see the reaction to this - the news flashed up on my monitor this morning.

Notice that the above statement says NOTHING on how this will benefit the cruise passenger, only the shareholder. Because the bottom line is that it won't - this is indeed a very sad day for Regent and Oceania passengers. As they say, at the end of the day, it is ALWAYS about the money and nothing else. You can bet your bottom dollar, the Oceania and Regent that we now know will be history very soon, no matter what PR baloney comes out of corporate. A great deal on money is being spent and they want to see a fast and significant ROI.

I work in M&A - in the majority of cases, these deals almost exclusively benefit the parent organization but rarely the end user, i.e. the cruise passenger. As an example - looked what happened to Cunard after it was taken over by Carnival. I can provide you with hundreds, if not thousands of business case studies where this is the norm. If anyone thinks different, I have a bridge to sell you in Brooklyn.

Even if the Prestige corporate hierarchy remains the same, they still have to report to the mother ship who controls the purse strings.

The only ones who will benefit from this in the near future is the financial house putting the deal together, the major stockholders and the lawyers working on both sides of the deal.

I have lots more to say on this, some from a professional view, but I need to get back to work - as soon as I get a chance, I will be back with additional comment.

Really bummed out about this - recently made platinum. By the way, I am sure this is one of the first areas to be tinkered with because the benefits are quite substantial. Remember - $3B is being spent on this deal and someone has to pay for it -

This is also in the terms of agreement:

Under the terms of the deal, Norwegian Cruise Line could pay up to an additional $50 million to Prestige’s shareholders if the target company meets certain financial performance targets next year.

What this means - they are looking for substantial increases in net earnings from currently reported P&L. If you thought the bean counters were adversely affecting the Regent experience, hold on to your hats because you ain't seen nothing yet.

gnomie :)

In the Reuters announcement it says FDR has agreed to stay until the end of 2015

Just as the airlines recently changed the million milers benefits, shortly NCL will change the million nighters benefits.

I think the bottom line is that shortly we will no longer have what we knew as luxury cruise lines....only luxury prices..

To complete the partial statement posted above "Prestige Cruises chairman and ceo Frank Del Rio will keep his role and is committed to staying at least through the end of 2015. Sheehan expressed the hope that Del Rio—who he called 'a genius in this industry,' will continue beyond that, adding Prestige has a president and chief operating officer [Kunal Kamlani] who is 'a good, solid guy. He's ready in the bullpen.'

I'm certainly not going to wring my hands from now until the day FDR decides to retire. We will continue to enjoy each and every cruise and may add another one next year. I have no concern whatsoever for Regent or Oceania passengers. The Voyager and Mariner have been refurbished - the new ship is underway - everything looks good. My hope is that FDR will be on the maiden voyage of the Explorer. That would be the perfect send off for his well-deserved retirement (if that is what he intends to do).

I remember the rumors and negativity that were on the Cruise Critic boards for a long time after Apollo purchased Regent. Hopefully we won't go to that place again.

To complete the partial statement posted above "Prestige Cruises chairman and ceo Frank Del Rio will keep his role and is committed to staying at least through the end of 2015. Sheehan expressed the hope that Del Rio—who he called 'a genius in this industry,' will continue beyond that, adding Prestige has a president and chief operating officer [Kunal Kamlani] who is 'a good, solid guy. He's ready in the bullpen.'

 

I'm certainly not going to wring my hands from now until the day FDR decides to retire. We will continue to enjoy each and every cruise and may add another one next year. I have no concern whatsoever for Regent or Oceania passengers. The Voyager and Mariner have been refurbished - the new ship is underway - everything looks good. My hope is that FDR will be on the maiden voyage of the Explorer. That would be the perfect send off for his well-deserved retirement (if that is what he intends to do).

 

I remember the rumors and negativity that were on the Cruise Critic boards for a long time after Apollo purchased Regent. Hopefully we won't go to that place again.

The rumors and conjecture are no different now than they were then.

Remember Mark Conroy....or was that "Remember the Alamo?"

How do we know what would be the perfect sendoff for the executives...remember, this is all about money...so let's not dress it up as anything else.

For what its is worth, my bet is that FDR will not only stay, but he will be eyeing the CEO job of NCL. Don't under estimate the allure of power and the need to be on top in the corporate world. That is of course unless he gets a massive personal payout from this deal and decides to retire to his own personal yacht!

To complete the partial statement posted above "Prestige Cruises chairman and ceo Frank Del Rio will keep his role and is committed to staying at least through the end of 2015. Sheehan expressed the hope that Del Rio—who he called 'a genius in this industry,' will continue beyond that, adding Prestige has a president and chief operating officer [Kunal Kamlani] who is 'a good, solid guy. He's ready in the bullpen.'

 

.

Again, this is standard in the industry - it is the same line over and over again, of course management will stay - they are the best in the industry.

What are they going to say? Remember, as I said before, it is all about the money, nothing more, nothing less and the one and only goal is to increase the value to shareholders.

However, what usually happens - they stay on for a few months, and then remain on the payroll but are performing "special assignments" for the company from the comfort of their home, meanwhile they are home not able to do anything due to a rock solid "do not compete" clause. I think I can count on one hand circumstances where the corporate officers remain and thrive with the parent organization.

gnomie :)

Agree Sunprince.

In terms of Mark Conroy, as I posted on another thread, he was President of Regent for five years after the purchase of Regent by PCH and remains in a paid advisory role today! He is definitely not forgotten.

Again, this is standard in the industry - it is the same line over and over again, of course management will stay - they are the best in the industry.

 

What are they going to say? Remember, as I said before, it is all about the money, nothing more, nothing less and the one and only goal is to increase the value to shareholders.

 

However, what usually happens - they stay on for a few months, and then remain on the payroll but are performing "special assignments" for the company from the comfort of their home, meanwhile they are home not able to do anything due to a rock solid "do not compete" clause. I think I can count on one hand circumstances where the corporate officers remain and thrive with the parent organization.

 

gnomie :)

Yes, yes, and yes. Been through 4 or 5 M&A's, including one by GE, and what you said is most certainly the script. It's corporate kabuki. It would be nice if this were the exception that proved the rule, but I'm not holding my breath.

I can see why the Oceania fans would fear change. Frankly, I'm not sure it's the same for Regent. As a long-time Regent cruiser, for me the height was back in the Radisson days (when they were losing money.) Since then Regent has priced itself out of my league entirely now, is making money hand over fist apparently, without improving the product substantially. I can only hope that it gets shaken up a bit by this sale, so that the product might attract us again.

You may be interested to see that the company that owns Prestige also owns 20% of NCL!

http://www.reuters.com/article/2014/09/02/us-prestigecruises-m-a-norwegiancruiseli-idUSKBN0GX18R20140902

Aloha all,

Oh, how I loathe corporate speak let me count the ways . . .

Prior to moving to Hawaii, we taught abroad at various universities and colleges for many years. I think that if one of my students would have handed in a paper with standard US corporate-speak, I would have put a huge red X through the entire paper, and my comments would have said something like "this has no meaning in English; please try again."

Having said this, I just love these lines from NCL's rationale for acquiring Prestige:

Opportunities for synergies and the sharing of best practices among brands; (I take this to mean something like: For all three brands, we will adopt those practices which will increase revenues and cut costs for the corporation)

An increase in economies of scale providing greater operational leverage; (For this one, I imagine it to mean something like going to vendors to get price breaks by offering to purchase goods and services in much larger quantities, for much lower prices. Of course, if current vendors won't play along, NCL will look elsewhere for better pricing--this could result in a real change of goods offered aboard ships).

Additionally, a contingent cash consideration of up to $50 million to Prestige shareholders would be payable upon achievement of certain 2015 performance metrics. (This is my personal favorite. I think it means that if Regent and Oceania can reduce costs and increase revenue substantially over the next year or so, there is a huge bonus to be had for the current Prestige shareholders. Of course, one might ask who will pay for the achievement of these "performance metrics.")

Probably should not have written this, but the dreaded corporate-speak is one of my pet peeves, and I could not keep my fingers from the keyboard.

Hope none of the above happens but would not bet against it.

Aloha from Hanalei,

Mark

This email just rolled in. Describes it as a done deal:

Dear Guests,

We have some exciting news to share. The parent company of Regent Seven Seas Cruises, Prestige Cruises International, has agreed to be acquired by Norwegian Cruise Line Holdings, Ltd., parent company of Norwegian Cruise Line.

For our loyal guests, you can rest assured that the Regent Seven Seas Cruises experience you've come to love and cherish will remain unchanged. At Regent, we pride ourselves on providing our guests with the most inclusive luxury experience at sea with included roundtrip air, fine wine and spirits, unlimited shore excursions, specialty dining, ground transfers and gratuities. We continue to enhance our offerings for guests with our expanded free internet program that begins next year, and in summer 2016 we will introduce the most luxurious ship ever built with Seven Seas Explorer®.

With Norwegian Cruise Line, we've found a partner that shares a similar passion for going above-and-beyond to deliver exceptional guest experiences and we're excited about starting this new chapter for our company.

When the transaction is complete later this year, it will bring together three great brands together as part of one family. The combination will create a diversified cruise operator with a full spectrum of offerings that range from family cruising on Norwegian's innovative Freestyle Cruising ships, to the country-club casual experience on Oceania's fleet, to the all-inclusive, more intimate experience afforded by Regent Seven Seas Cruises' luxury offering.

For the Regent Seven Seas Cruises brand, our mission will be to preserve the distinct offerings, guest experiences and unique onboard culture our guests cherish onboard our ships while always exploring ways to further enhance our luxury experience.

Thank you for choosing Regent Seven Seas Cruises for your dream cruise vacation. We look forward to welcoming you onboard in the near future and for many years to come.