Festival: IPO Next

Festival Cruises is moving “full steam” ahead on its timetable for a stock listing, with Greece its first but not only choice, according to Festival Chairman George Poulides.

“Our growth strategy includes a public listing in the near future, which we view as further supporting our expansion in the years to come,” Poulides said.

Contrary to industry rumors, Poulides emphasized that Festival is not “up for sale.” Nor is he a believer in what he called “merger mania.” ”Many mergers are not good for the participating companies and I personally do not feel that they have brought any wider benefits to the cruise industry,” he said. “Like any industry that is populated by a limited circle of companies, we tend to talk to one another about cooperation possibilities from time to time. But this is a far cry from actually agreeing to a merger.

“I tell you very plainly that Festival has never sought a merger with anyone, nor is it doing so now, nor will it do so in the future as far as I can envisage,” Poulides added.

He continued, “It is important to realize that P&O’s approach to us was a special case where not only did we feel that the offer was a fair one, we had a very good chemistry and had settled on a joint strategy which seemed to offer natural benefits for the future development of Festival.”

“Naturally I do not like to rule out anything happening in the future, but I feel it unlikely that all the right circumstances will again come into place so that Festival would be tempted to join forces with another cruise line,” Poulides said.

“It must surely be counted more likely that a growth-oriented company such as ours may at some stage be interested in acquiring another operator. But our planning does not include this either.

“Our objectives remain exactly what they have always been: To continue the marketing success of Festival Cruises and to continue to expand our fleet to satisfy the growing demand for our cruises. There is no agenda to be the world’s biggest cruise line, or third, or fifth.

“Instead, we are focused on being among the world’s most profitable cruise lines and to achieve industry-beating returns on investment for our present and future shareholders,” Poulides said.

He explained that the elements which have brought Festival Cruises to its present position will also provide the foundation to allow the company to flourish in the future. “Festival brought a fresh cruise product to the market, offering superb value to a largely untapped European market of cruisers,” Poulides said. “The major cruise lines have not really penetrated the Europe-wide passenger market which is our primary market.”

According to Poulides, Festival had invested in quality ships and onboard service from the very beginning. He described the company’s culture as one of continuous appraisal and improvement.

“Service and cuisine, commitment to value, technical know-how, a strong safety culture, experienced management combined with the team spirit of a young, growing company, plus our commitment and knowledge of the pan-European markets, are our strong points,” Poulides remarked.

“We embarked on our series of premium-class European vessels with the Mistral, to be followed by the upcoming European Vision and European Dream, which will be continued with even larger, state-of-the­ art vessels in the near future.

“We intend to finalize contracts for the pair of 2,000-passenger ships already optioned at Chantiers de l’Atlantique and more after that.

“As you know, introducing Grand-class ships was under discussion with P&O. Ships of that size will be something we will independently analyze in due course,” Poulides noted.

As regards the company’s older ships, Poulides said they were not that old and can continue to sail for a long time to come.

The older ships score consistently high with U.S. Public Health and other shore-based authorities, according to Poulides, who added that they are also popular with passengers.

Five to 10 years from now, Poulides said he anticipates Festival will have a dozen ships and be the undisputed leader in European cruising “sooner than you might think.”

The agreement with P&O valued Festival at more than $700 million, but the future evaluation is also expected to be affected by the introduction of the new ships, starting with the European Vision next year.

“For what it is worth, banks have valued the company in the $800 million to $1 billion range prior to a stock listing,” Poulides said.

At the time of writing, Festival’s debt was in the $300 million range.

As a private company, Festival does not release revenues or earnings, but Poulides said that “Festival compares very favorably to industry norms in terms of operating costs and yields.

“In terms of net income, we are obviously not as big as Carnival, but we have performed better than some public cruise companies.”

With four ships at present, the Festival organization includes about 400 employees shoreside in Piraeus and Monte Carlo, according to Poulides, who said that 1,600 are employed aboard the Azur, Bolero, Flamenco, and Mistral, and that this number will increase to 3,000 with the introduction of the European Vision and European Dream in 2001 and 2002, respectively.

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