Apollo to Buy 50% of NCL

Apollo Management, a huge private equity group that's well known in maritime circles and that owns Oceania Cruises, plans to invest $1 billion cash in NCL Corporation, parent of Norwegian Cruise Line and NCL America. Apollo will garner a 50 percent stake in NCL Corp. and three of five seats on its board of directors. Star Cruises, NCL Corp.'s current owner, will retain 50 percent ownership and receive future monetary consideration for its current efforts to bolster NCL America's revenues. Star said the deal will allow it to focus more on expanding within Asia.

What does Apollo's investment mean to agents? It's "business as usual," say the companies involved. Steve Martinez, partner of Apollo Management, stressed that current NCL Corp. management including Colin Veitch, president and CEO, will remain at the helm. He also said there will be no changes in day-to-day operations. And, the companies say they're willing to give NCL America adequate time to make a financial turn-around. In a note to UBS Warburg investors, cruise financial analyst Robin Farley described the acquisition as "more of a re-capitalization than a change of control."

Overall, Farley characterized the deal as "a vote of confidence in the [cruise] industry." Apollo's $1 billion cash infusion will repay NCL Corp. debt and strengthen the cruise company's balance sheet. That also should help NCL compete more effectively against the world's Big Two cruise companies--Carnival Corp. and Royal Caribbean Cruises Ltd. "To have an investment on this scale by one of the very top names in the private equity world is a huge vote of confidence in the new NCL we have created since Star Cruises became the owner in 2000," Veitch said at a Friday press conference.

Since Apollo invested $850 million in Oceania Cruises earlier this year, speculation raged Friday about a potential merger or synergies between Oceania and NCL Corp. Apollo said there are no plans for combining operations. Analysts, though, still see potential. Farley told her investors Friday: "We would expect Apollo to monetize its investment in NCL in the future through an IPO (initial public offering), which could perhaps ultimately combine Oceania and NCL into one company."

Right now, though, Apollo, Star and NCL Corp. officials are focused on securing necessary shareholder and regulatory approvals to complete the deal announced Friday. Timing-wise, that should occur no earlier than the fourth quarter of this year. (SY)