NCL, RCL and RVL in Deal

Kloster Cruise has announced that it has signed a letter of intent with AEA Investors of New York for AEA to acquire Royal Cruise Line and Royal Viking Line for $565 million, including the assumption of $60 million of advanced ticket sales.

The purchase includes the Crown Odyssey, Royal Odyssey and Star Odyssey for RCL and the Sun and Queen for RVL.

As part of the transaction, Kloster expects to provide some fee-based cruise services for RCL and RVL for the foreseeable future.

A spokesperson for AEA said AEA has “traditionally invested in partnerships with existing managements and has a lot of respect for the existing managements of the two cruise lines and their commitment to their customers and product quality.”

Sources noted that AEA is also known for turning companies around, then selling or taking them public.

The sale is subject to the satisfactory completion of AEA’s due diligence which is expected to take 90 days, the negotiation and execution of definite documentation, the receipt of financing and customary conditions.


Adam M. Aron, President and CEO of Kloster, said, “This sale allows Kloster to focus on re­-establishing Norwegian Cruise Line to the preeminent leading industry position it enjoyed for much of two decades, and provides Kloster with the resources necessary to immediately execute our plan to significantly expand the NCL brand and fleet.”

Kloster intends to use the proceeds of the sale to strengthen, grow and modernize NCL, as well as to deleverage and strengthen its balance sheet. The company will immediately enter into discussions with various shipowners and shipyards to acquire at least two new large vessels for NCL suitable for deployment in the Caribbean markets. In addition, Kloster will apply some of the sale proceeds to debt repayment, increased cash balances and balance sheet strengthening.

AEA Investors is said to be among the oldest private equity investors in the United States and its investors include more than 60 current or former Chief Executive Officers of major U.S. corporations as well as a number of university endowments, including Harvard, Princeton, and Yale, according to the spokesperson. Since AEA is a private investment firm, it does not divulge its capital resources.

The spokesperson also said that “there are no plans yet beyond the acquisition and that any speculation would be very premature.”

He also said that AEA believes the RCL and RVL brand names represent the finest products in the luxury segment of the cruise industry.

Reports and Rumors

The announcement follows weeks of reports that RCL and RVL were for sale; reports that the company did little to quell or manage. In the meantime, the shares of VARD, parent company to Kloster Cruise, have climbed up on the Oslo Stock Exchange and reached a high of NOK 63.50 at press time.

Previous discussions were held with the Radisson group which already holds equity interests in Radisson Diamond Cruises and Swedish American Cruises. The reported price for RCL and RVL was $450 million. But Radisson was reportedly not interested in buying but instead wanted a smaller equity position and would assume the sales and marketing function.

For Radisson, RCL and RVL would represent an excellent opportunity to bring the company to the forefront of the industry and incorporate its fledgling cruise operations under recognized product names.

Other somewhat unlikely scenarios include a partnership of sorts between RCL/RVL, Crystal Cruises and Cunard Line.

Former Kloster executives, Erland Raastad and Torstein Hagen, have also figured prominently in the reports, but neither seem to be part of the AEA deal.

Instead, it appears that Aron has moved incredibly fast in shoring up Kloster’s fortunes. He has only been on the job four months.

In the process, Aron has also largely undone the works of previous managements. The sale of RCL and RVL is an interesting turn of events since Kloster’s recent management spoke very highly of the profitability of RCL and the new RVL ships.


The net $505 million price that AEA is prepared to pay for RCL and RVL seems to be a realistic reflection of today’s market.

Kloster Cruise has previously stated values for their ships, and in 1991 the same ships (only) were valued from $645 million to $529 million.

In 1989, Kloster paid $225 million for RCL.

RVL was acquired in 1984 for $240 million.

While RCL has reportedly been profitable both before and after the company was acquired by Kloster Cruise, RVL on the other hand has mostly been a money losing proposition according to insiders.

Both brand names benefit from high and favorable market recognition, but both also face increasing competition in the premium market for RCL from Holland America Line, and in the luxury market for RVL from Crystal Cruises.

NCL Ships

New NCL ships may be a close reality. Sources have reported that designs for 1,800-passenger ships have been completed. Cost estimates are in the $300 million range. Kvaerner Masa-Yards appear to be at the top of the short list.

Aron, however, has to act fast to maintain NCL’s market position and market share. In the meantime, he is seemingly focused on a four-ship NCL fleet, the new sister ships, Dreamward and Windward, the Norway, and the Seaward.

The remaining two “white ships,” the Starward and the Southward, are for sale.

A new NCL is also likely to upset the plans of other mass market cruise lines and put forecasters and their supply/demand scenarios to shame. Any hope for “peace and quiet” for the dominant players may also be gone. NCL is clearly prepared to fight to regain its position of leadership.

Looking back, NCL should have built Knut Kloster Sr.’s Phoenix in the first place (1983/84) provided he would have been willing to down-size the ship to a more manageable size. Even half-size would have been giant by any standards back then. But Oslo and Miami managements also lacked the visions and instead it became a matter of prestige to acquire RVL.

That seems to have been the beginning of a down­-wards course, which Aron now seems to have reversed drastically.

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