Royal Caribbean to take majority stake in Silversea Cruises

Silversea's flagship, the 40,700 grt ,596 guest Silver Muse Silversea's flagship, the 40,700 grt ,596 guest Silver Muse

JUNE 14, 2018 —Royal Caribbean Cruises Ltd. (NYSE: RCL) and Manfredi Lefebvre D'Ovidio today announced an agreement for RCL to acquire a stake in privately-owned Silversea Cruises,

Under the agreement, Royal Caribbean will acquire a 66.7% equity stake in Silversea Cruises based on an enterprise value of approximately $2 billion. The purchase price of the equity being acquired is approximately $1 billion. RCL plans to finance the purchase through debt. In addition, Lefebvre will qualify for an estimated contingent consideration of approximately 472,000 RCL shares, payable upon achievement of certain 2019-2020 performance metrics.

"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."

Fain added: "We are proud to welcome aboard Manfredi Lefebvre, a visionary leader whose high standards and history of innovation we deeply respect. Manfredi will remain Executive Chairman of Silversea, continuing to lead its strategy long term."

"This partnership will bolster the growth of this exceptional brand founded by my father," said Lefebvre. "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.

Lefebvre and Fain also confirmed that Silversea's CEO Roberto Martinoli will continue in his role, working with the existing Silversea management team.

Silversea, with its intimate, all-suite ships, full spectrum of global cruise offerings sailing to more than 1,000 global destinations, and unique luxury expedition vessels, adds a pioneering ultra-luxury brand to RCL's industry-leading brand lineup. 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.

The closing is expected to be completed later in the year, subject to customary closing conditions and regulatory approvals.

For 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 Silversea deal, 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.

"Fortunately," it says, "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."

Perella Weinberg Partners LP served as financial advisor to RCL and Skadden, Arps, Slate, Meagher & Flom LLP provided legal counsel. Barclays PLC served as financial advisor to Manfredi Lefebvre and Morgan, Lewis & Bockius LLP provided legal counsel.

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