Apollo expands luxury cruise holdings

The private equity firm has anchored another $1 billion cruise deal with its agreement to buy Regent Seven Seas Cruises.

Apollo Management has inked its third cruise line deal this year, this time agreeing to buy luxury line Regent Seven Seas Cruises from Carlson, a global leisure conglomerate that wishes to better focus on its hotel business.

A source close to the deal puts its enterprise value at approximately $1 billion (€683 million), roughly the same amount Apollo spent in August for a 50 percent stake in NCL Corporation, a Miami-based company operating ships under banners including Norwegian Cruise Line. Earlier this year, Apollo also purchased luxury cruise line Oceania Cruises in a deal valued at $850 million.

“We’re big believers in the sector,” said Steve Martinez, a partner with Apollo. Its business model, cash flow and growth-oriented demographics – cruisers are typically baby boomers from North America – are all very attractive, he said.

Apollo has been interested in the cruising industry for a few years, and has worked on opportunities with Apollo senior operating partner Adam Aron, the former head of Norwegian Cruise Line whom Apollo tapped to run Vail Resorts. With Aron, Martinez said Apollo has “been looking at a number of these companies over the last 18 months”, and worked on putting together the Regent deal over the last year.

Regent, based in Fort Lauderdale, and Oceana, which operates out of Miami, will become subsidiaries of newly formed Prestige Cruise Holdings, but the two will remain separate companies, dedicated to serving different segments and price points of the luxury cruising market. Though the companies will maintain their respective headquarters and leadership, Apollo may “leverage some economies of scale in terms of shore-side operations”, Martinez acknowledged. NCL will not be incorporated into the Prestige platform.

Apollo’s sixth buyout fund closed in January 2006. The fund and its co-investment vehicle have commitments of roughly $11.6 billion. The private equity firm is thought to be targeting at least $15 billion for its seventh fund.