The acquisition creates a company with brands in the contemporary, upper-premium and luxury segments. Norwegian currently fields 13 ships with a total of 34,500 berths, while Prestige has eight ships and nearly 6,500 berths. Norwegian has contracted four large newbuilds for delivery from 2015 through 2019, while Prestige's Regent has one ship coming in 2016.
The company is 'fully committed to retaining the brand propositions, guest experiences and cultures of the Norwegian, Oceania and Regent brands,' Norwegian president and ceo Kevin Sheehan said.
Norwegian will finance the deal with cash, new and existing debt facilities and by issuing approximately 20.3m shares of NCLH common stock or $670m to Prestige shareholders, which is equal to about 10% of current NCLH shares outstanding. Barclays, JP Morgan Securities and Deutsche Bank have provided committed financing to support the acquisition.
The $3.025bn transaction consideration includes the assumption of debt. Additionally, a contingent cash consideration of up to $50m to Prestige shareholders would be payable upon achievement of certain 2015 performance metrics. $3.025bn is about 11 times 2014's estimated adjusted EBITDA.
The grouping of the companies, envisioned at least as far back as 2007 when private equity giant Apollo Management began making cruise investments, represents 'an extraordinary opportunity' for Norwegian to 'expand our market presence by adding two established, award-winning brands in the upscale cruise segment with loyal followings,' Sheehan said. '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.'
Sheehan said the companies' 'complementary strengths and skill sets 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.'
Norwegian expects to recognize an immediate $25m in synergies from such areas as joint purchasing and port agreements, among many others, with more opportunities to be realized in the next several years. While expressing admiration for the Prestige team, Sheehan indicated there also may be opportunities in the area of shoreside staffing. 'We're going to do this carefully. We will take the best players and the best thinking,' he said.
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.'
'We are excited to become part of the Norwegian family and start a new chapter for our company,' Del Rio commented. '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.'
Apollo currently holds a 20% stake in Norwegian, while Genting Hong Kong has 28% and TPG Viking Funds 7.9%. Apollo also owns 59% of Prestige Cruises.
In early July, Norwegian's board formed a transaction committee consisting of disinterested directors that was fully delegated with the authority to negotiate and approve a transaction. Genting HK and certain funds affiliated with TPG Capital consented to the deal, which is expected to close in the fourth quarter.
Barclays is acting as lead financial adviser to Norwegian, Deloitte Consulting is acting as diligence adviser and Weil, Gotshal & Manges is providing legal counsel. UBS Investment Bank is acting as financial adviser to Prestige and Paul, Weiss, Rifkind, Wharton & Garrison is providing legal counsel. Perella Weinberg Partners is acting as financial adviser to Norwegian board's transaction committee. Cravath, Swaine & Moore is providing legal counsel. JP Morgan Securities and Deutsche Bank are also serving as financial advisers to Norwegian.
The company plans an investor meeting in New York in November, Sheehan told analysts in a call early Tuesday.
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