Update: Norwegian Cruise Line Holdings Acquisition

Sep. 4.14 | About: Norwegian Cruise (NCLH)


Norwegian is buying up Prestige Cruises for over $3 billion.

We’re still bullish on the company as it has one of the best fleets in the industry.

We didn’t expect an acquisition of this size but view the move as a long-term positive as it’s move toward higher end customers .

Norwegian Cruise Line Holdings (NASDAQ:NCLH) announced earlier this week that it's looking to snatch up Prestige Cruises International for just over $3 billion. Prestige was planning an IPO later this year.

Shares of Norwegian are 8% over the last week. It's now that much closer to our $40 price target. The stock is up 11% since we first covered it back in May, at the time that it had the best fleet in the industry. With a $7.5 billion market cap, the move is instrumental for Norwegian. Prestige generates around $1.6 billion in annual revenues, compared to Norwegian's 2.7 billion. However, the acquisition is not just because of the size, but also given the move to tap higher-end customers, as well as faster growing markets.

Prestige runs luxury cruise ships to more affluent customers, operating the Regent and Oceania brands. Norwegian posted a solid 2Q earnings report where its premium ships are being received well. The other side of things is that Prestige has routes to the Mediterranean, Asia, Africa and South America regions -- markets that are growing in popularity and have strengthening economies. One hiccup we can see is that the PE firm Apollo Global owns Prestige Cruises. They also own 20% of Norwegian. They could try to block a deal in an effort to try their hand at the IPO markets.

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