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Two cruise lines to merge
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June 17, 1997: 9:02 a.m. ET
Royal Caribbean, Celebrity agree on $1.3 billion pact to combine fleets
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NEW YORK (CNNfn) - Royal Caribbean Cruises Ltd. and Celebrity Cruise Lines Inc. on Tuesday said they plan to merge in a transaction valued at $1.3 billion, creating a cruise line that would rival industry leader, Carnival Corp.
In a statement, Royal Caribbean said the combination with Celebrity, which is a joint venture between the Chandris Group and Overseas Shipholding Group Inc., will result in an overall fleet of 20 ships, accounting for more than 38,000 port calls by the year 2000.
"Strategically, this combination helps reshape the vacation industry landscape by providing each brand with the market presence and the operating strengths of the other," said Richard D. Fain, Royal Caribbean's chairman and chief executive, in a statement.
Royal Caribbean said it intends to maintain the Celebrity brand separate from the Royal Caribbean brand.
The total transaction calls for a purchase price for the equity of about $500 million and the assumption of about $800 million in debt. The purchase price will be paid by a combination of $230 million in cash and the issuance of 7.4 million shares of Royal Caribbean common stock.
"This is a great fit for Royal," Jim Winchester, an analyst with Lazard Freres & Co. who specializes in the shipping industry, told CNNfn. "It's an immediate fixer-upper where Royal can overlay its strengths in management and shoreside infrastructure. And Celebrity has good brand identity."
Royal Caribbean said it intends to utilize credit lines to finance the cash portion of the purchase price. The company also said it expects "some dilution" in 1998 earnings from the issuance of new stock as part of the acquisition.
Miami-based Royal Caribbean operates 11 ships with a total capacity of 19,770 passengers. The company offers 66 itineraries and 156 destinations in Alaska, the Bahamas, Bermuda, the Caribbean, Europe, the Far East, Hawaii, Mexico, Panama Canal, Russia and Scandinavia.
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