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Royal Caribbean Buys Stake in Luxury Line Silversea

Royal Caribbean Cruises Ltd. and Silversea Cruises Chairman Manfredi Lefebvre D’Ovidio on June 14 announced an agreement for RCL to acquire a stake in privately-owned Silversea Cruises. Under the agreement, RCL will acquire a 66.7 percent equity stake in Silversea worth about $1 billion. RCL plans to finance the purchase through debt. The closing is expected to be completed later in the year, subject to customary closing conditions and regulatory approvals.

“Silversea is a crown jewel, and the acknowledged leader in luxury and expedition cruising, two key markets that are poised for growth,” said Richard D. Fain, chairman and CEO of Royal Caribbean Cruises Ltd. “Uniting our two companies presents an extraordinary opportunity to expand vacation options for guests and create revenue in strategic growth areas.”

Lefebvre will remain executive chairman of Silversea, Fain said, calling him “a visionary leader whose high standards and history of innovation we deeply respect.” They confirmed that Silversea CEO Roberto Martinoli will continue in his role, working with the existing Silversea management team.

“This partnership will bolster the growth of this exceptional brand founded by my father,” Lefebvre said. “I have always been kindred spirits with Richard, and we share a vision of offering excellence and leadership to our guests. This new partnership gives Silversea the opportunity to accelerate the growth of the most successful luxury and expedition cruising brand in the world.”

The strategic rationale for the partnership includes:

• Driving long-term capacity growth in the burgeoning luxury and expedition markets at a much larger scale than what Silversea would achieve independently;

• Diversifying Royal Caribbean’s portfolio and increasing its expedition offerings by adding a premiere ultra-luxury brand;

• Leveraging the global footprint of the combined companies to generate demand and increase vacation and destination options for the guests of both companies;

• Realizing significant synergies related to global market access, supply chain, purchasing power and other economies of scale.

Lefebvre said he is confident that the significant investment stake he is retaining will sizably increase its value through the growth this long-term partnership will enable.

Silversea, with its intimate, all-suite ships, cruise offerings sailing to more than 1,000 global destinations, and unique luxury expedition vessels, adds a pioneering ultra-luxury brand to the RCL’s brand line-up.

RCL’s largest brand, Royal Caribbean International, is a contemporary brand focused on adventure-seeking families. Celebrity Cruises is a premium brand providing a modern luxury experience to discerning global travelers, and Azamara Club Cruises is a destination immersive brand offering luxury voyages to unique ports. The company also operates the regional TUI Cruises and Pullmantur brands as part of long-term joint ventures.

Regarding 2018, Royal Caribbean reconfirmed its latest adjusted EPS guidance of $8.70 to $8.90 per share. This updated guidance does not include any potential impact from the transaction, although RCL does not expect the transaction to materially impact near-term adjusted earnings per share.

Operationally, the company’s forecast for the third and fourth quarters has remained unchanged but increases in the market price of fuel and the strength of the dollar are expected to cost the company roughly 25 cents per share. But strong close-in demand for core products and better-than-expected performance below the line is expected to drive improved results for the second quarter. These improved results are expected to offset the impact in the second half of the year, which allows the company to maintain its guidance for 2018.

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