Carnival Goes Public

Carnival Cruise Lines is planning a public offering in late July. The line expects to offer 18 percent of the company or 23.6 million shares between $14 and $17.

Managing underwriters are Salomon Brothers, Bear, Searns; E.F. Hutton, and Morgan Stanley. After the offering, approximately 135 million shares will be outstanding and book value will equal $4.11 per share. Latest 12-month earnings equal $.78 per share for a P/E of 18-22. Proposed listing will be on the American Stock Exchange under the symbol CCL.

According to the New Issues newsletter, “anything having to do with ships, from oil tankers to cruise ship, seems to be a feast or famine business. Carnival is feasting right now, but any aspects of tourism is subject to consumer fads. For that reason, these shares would be most attractive at or below the lower end of the indicated offering price.”

Of the proceeds, $211 million will be used to repay virtually the company’s entire debt, incurred primarily in the construction of the Jubilee and Celebration; $100 million will be used to finance the ongoing construction of Carnival’s hotel complex in the Bahamas; $81 million will be declared as a special dividend to Ted Arison; and the rest will be used for general corporate purposes.

Spokespeople for other publicly traded lines, expects Carnival to make a better market for their shares and establish a P/E for the industry.

Regency Cruises was the first cruise line to go public in mid-1985. It offered a unit, consisting of a common share and a warrant, for $1. It’s shares are currently trading for about $2.70, with a P/E of 5 – 6.

American Cruise Lines went public in September 1986, offering shares at approx. $8.62. (Source: Standard & Poor’s Corp.) It’s shares are currently trading for $4.12.

Bermuda Star Line went public last March, offering shares for $6, which are currently trading for $3.75.

Venus Cruise Line made a public offering in 1985, but plans were later aborted.

It is expected that Norwegian Caribbean Lines will make a public offering this fall, and Sea Venture has announced intentions of going public some time in the future.


According to the Carnival prospectus net revenues for the fiscal year ending November 1986 were $97.7 million on total revenues of $420.8 million. In 1985, net earnings were $55.6 million on sales of $313.5 million. As a Panamanian corporation, Carnival also operates virtually tax free.


Selling and administrative costs have increased from $27.4 million in 1982 to $70.5 million in 1986. Expressed as percentage of total revenues, selling and administrative costs remained 18 percent in 1984; 19 percent in 1985; and 17 percent in 1986. Advertising costs have reportedly increased drastically from $15 million in 1984 to $25 million in 1986.

The company lists its largest purchases for airfare, advertising, bunker and diesel fuel, food and related items, hotel supplies and products related to passenger accommodations.


Total assets of the company are listed as $556 million. Debt is listed at approximately $227 million.


After the public offering, Ted Arison, Chairman and founder of Carnival, will retain about 75 percent and his shares, according to New Issues, should be worth upwards of $1 billion. Six percent will be held in a family trust.

Passenger Traffic

From 1983 to 1986, Carnival’s passenger traffic increased at an average annual rate of 30.8 percent, compared to the industry’s average of 12.7 percent. The line’s share of the North American market grew from 13.3 percent to 20.8 percent. In 1986, Carnival carried some 443,000 passengers.

Marketing Angle

Going public also means that Carnival stands to gain thousands of shareholders who in turn may form a new market base. It is also expected that travel agents will be among the new shareholders, giving them an extra incentive to sell the line’s cruises.


The line has been consistent and aggressive in all areas, with a clear vision, according to Dr. Dan Sarel of Marketscope. The company, the ship names, the advertising – all convey one message, he said and explained that Carnival has the highest brand awareness in the industry.

Others credit Carnival with the most aggressive consumer and trade marketing; the only cruise line with a network television campaign; and the cruise line with the strongest agent incentive programs.

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