Norwegian’s IPO seen as ‘historic,’ a plus for the industry
Sheehan - credited for leadership
Norwegian Cruise Line’s successful initial public offering—shares priced higher than expected and roared up more than 30% in early Friday trading—is being called ‘historic,’ a boost for the entire industry and a possible driver of more transactions.
The IPO has been ‘a long time coming,’ in the words of Frank Del Rio, chairman and ceo of Prestige Cruise Holdings. ‘It’s a celebration, a validation of all the good work Kevin [Sheehan] and his team have done. Norwegian’s a player, and this is recognition for a wonderful turnaround.’
Shares were priced at $19, above the expected range of $16 to $18, and the 23.5m shares sold raised $446.5m.
Norwegian’s IPO is history-making, in the view of Bob Dickinson, a director of Carnival Corp. & plc and the past president and ceo of Carnival Cruise Lines. ‘It shows again the maturity of our industry that the last significant player has gone public,’ he said.
The business is ‘only as strong as its weakest link because it is an oligarchy,’ Dickinson added. Thanks to Norwegian’s new-found brand strength, ‘they’ve been able to get higher prices and we all benefit from that.’
As Del Rio sees it, ‘The cruise industry needed this. For too long, there have been only two publicly traded companies and therefore the market [Wall Street] doesn’t pay attention to the cruise industry.’
Another public player and an IPO with ‘such a phenomenal start, and such strong interest, is fantastic for the industry,’ Del Rio said. ‘It’s good for the company, it’s good for Carnival and Royal Caribbean, and it’s good for other industry players that might want to go public some day.’
‘It’s never too late to do the right thing,’ quipped Rod McLeod, who was president and coo of NCL in 1987 when the company first planned a US public equity offering. Carnival had just raised $400m in its IPO. NCL was setting off on its road show when markets around the world crashed on Oct. 19, ‘Black Monday.’
For a variety of reasons, internal and external, 25 years went by before the IPO was achieved.
McLeod credited Norwegian’s ‘very savvy ownership’ combined with ‘inspired leadership’ since private equity giant Apollo paid $1bn for a 50% stake in 2008. (It subsequently sold 12.5% to TPG.)
‘They’ve been patient. They waited for the right time, and when the right time came, they didn’t wait,’ McLeod said, noting that NCL’s road show lasted just days. ‘They’re obviously market-savvy people. This is the world Apollo lives in.’
And, he noted, NCLH is coming off the blocks fast. Shares shot up as high as 34% in early trading, pushing the stock above $25 at a time when Carnival is trading around $38-$39 and Royal Caribbean, $36-$37. In its first session, NCLH closed at $24.79, up 30.47%. Just 12% of the company was offered in this initial sale.
From a distribution standpoint, going public should have no downside for Norwegian, according to Brad Tolkin, co-ceo and co-chairman of World Travel Holdings, Norwegian’s Elite Agency of the Year. Norwegian ‘has been working like a public company since Apollo invested significantly and brought Kevin [Sheehan] on board,’ he said.
In Tolkin’s view, there’s no difference for travel agents in dealing with a public company than a private one and, from a consumer standpoint, going public can only be beneficial.
‘That’s going to resonate positively with consumers. The public perception is that a publicly traded company is better capitalized ... and there will be a lot more [analyst] coverage and more attention generated,’ Tolkin said.
Wide credit is being given to ceo Kevin Sheehan for leading a turnaround that made it possible for the distant No. 3 player to reach this point. Norwegian comprises just 11% of North America’s cruise capacity.
‘He took that company and made it significantly more profitable than it was and significantly better than it was in a lot of aspects,’ according to Dickinson, who said the management team is working well together under strong leadership, new ships are on the way and the brand is now clearly defined. ‘Shipboard and shoreside, the stars are aligning pretty well ... Everything has moved in a good direction.’
The IPO accomplished, it will be interesting to see what’s next, said McLeod, a principal of the South Florida-based consultancy McLeod Applebaum & Partners.
‘They’ve expanded their range of options strategically. Whether they sell the company, acquire or grow the company, it’s given them a lot more flexibility in looking for those options,’ McLeod told Seatrade Insider. ‘I think there’s another significant transaction coming at some point in time.’
Furthermore, he sees Norwegian’s IPO raising interest in how PCH, the parent company of Oceania Cruises and Regent Seven Seas Cruises, fits into Apollo’s portfolio.
‘It’s a tough act to follow,’ PCH’s Del Rio said. ‘PCH and Norwegian share a common controlling shareholder and certainly an IPO could be something that is in our future, but there are no plans for that right now.
‘Norwegian did a flawless job and I congratulate them.