This morning, cruise line company, Royal Caribbean (RCL
112.65, +4.67, +4.32%), announced an agreement to acquire a stake in
privately-owned Silversea Cruises in a deal which is expected to close later
Royal formed an agreement with Silversea’s Chairman Manfredi Lefebvre D'Ovidio whereby Royal would acquire a 66.7% equity stake in Silversea Cruises based on an enterprise value of about $2 bln. The purchase price of the equity being acquired is about $1 bln.
Royal plans to finance the purchase through debt. In addition, Mr. Lefebvre will qualify for an estimated contingent consideration of around 472,000 Royal shares, payable upon achievement of certain 2019-2020 performance metrics.
The two parties expect “significant synergies” related to global market access, supply chain, purchasing power, and other economies of scale. As part of the deal, Mr. Lefebvre and Silversea’s CEO Roberto Martinoli will retain their roles.
Regarding 2018, Royal reconfirmed its latest adjusted EPS guidance of $8.70-8.90/share. This updated guidance does not include any potential impact from the transaction, however, although Royal does not expect the transaction to materially impact near-term adjusted EPS.
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 $0.25 per share.
Fortunately, 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 completely offset the impact of the FX and fuel headwinds in the second half of the year, which allows the company to maintain its guidance for 2018.
The stock has been on a tear these past four sessions, with today's gains leaving the four-day move at +9.7%. This move comes as the stock was crushed nearly 15% from late April to early June.
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