Vernon Buxton's Cruise News & ViewsAug 29, 2007
Author: Vernon Buxton
My comments are in red.
Apollo buys half of NCL
Star Cruises has a new partner in the ownership of subsidiary Norwegian Cruise Line.
Apollo Management has taken a 50 percent stake in NCL Corporation for cool 1 billion dollars in cash.
The move was prompted by heavy under-performance of NCL America in Hawaii.
Under the agreement, NCL will have the same management, and for the near term, nothing will change.
Apollo Management is an investor, especially in leisure and entertainment-oriented opportunities, such as hotels and cruise lines.
Apollo recently purchased Oceania Cruises (100 percent for $ 850 million). The billion-dollar investment in NCL is one of the largest investments they have ever made. They will influence large decisions only to improve their return, not to micro-manage the product, according to a statement.
Speaking to that question, Steve Martinez, Partner at Apollo said, "We are fully supportive of the management team. Although we will effectively have a majority of the board, the day-to-day operations won't be seeing any change from our involvement. Those will lie squarely in the hands of Colin [Veitch] and his team."
NCL is looking at this as a vote of confidence in what it has been doing and the vision it has for the future. "We have gone through a lot of changes and challenges these past seven and a half years since Star bought NCL," said NCL Corporation CEO Colin Veitch. "The company today is a very different one. This investment, not just in size but perhaps even more importantly who the investor is, validates everything we have been doing."
Veitch said he was pleased that "the company is not actually being sold." Instead, Star is just taking in a partner. He said Star has backed them through the ups and downs of outside forces over the last seven and a half years (such as 9-11, industry consolidation above them, the rise in ship prices due to the strengthening of the euro, and the ups and downs of consumer confidence in the US economy), and in spite of everything, "Star has continued to pursue the strategy we agreed upon at the outset."
NCL will soon introduce its ninth new ship since 2000 (when Star purchased NCL), and it will retire the fourth of the older ships they had in 2000, and that will take NCL from having the oldest fleet in the industry to "the youngest and most distinctive fleet in the business," Veitch said.
The one question mark in the deal and in the future is the American-flagged operation in Hawaii. So far it has been a money-loser, but one initiative that may help turn things around is the "temporary" reduction in the US-flagged fleet to two ships. That will happen in February.
Also, last year Congress changed some of the rules so that NCLA could increase the number of foreign nationals working aboard.
Let not one of us imagine for even a second that running a cruise line is not entirely perilous in this day and age. On each ship there is crew of thousands to be paid…entirely dependent on bums in berths. NCL made strategically flawed decisions about Hawaii…the expectation simply could not be realised. And that began a chain reaction, starting with parent entity, Star Cruises, downwards.
Contrariwise, however, is the story of Oceania Cruises…started by one man, with one of the Renaissance ships, Frank Del Rio, and with lots of borrowed money. Now the Apollo group has paid him out a cool US 850,000 dollars…resulting in the opposite of a flawed strategy! A Cheshire cat doesn’t come into it!
With such a handsome cash injection, both Star Cruises and NCL will undoubtedly prosper…though now with Apollo VERY present when “strategic” decisions have to be taken.
It’s a funny old world, as Margaret Thatcher said the day she got hoofed!
Your correspondent has encountered other distractions to take me away from this column. Hope you’ve enjoyed my demented ramblings, as much as I have writing them. We may meet again…who knows?
We are going to miss Vernon’s informative and sometimes tongue-in-cheek comments each week in PORTS & SHIPS and thank him sincerely for his input these past few months.
We hope you will have much success in whatever path you now choose to follow, Vernon.
While obviously the character of the Cruise News column will have to change, we do intend keeping up to date with regular reports on the wonderful world of cruising, and particularly as it affects this part of the world. Watch this space… and within a few weeks we hope also to post this summer’s directory of cruise ship visits to southern Africa – Terry Hutson
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