Apollo to acquire 50% of NCL

Private equity firm Apollo Management will invest $1Bn in Norwegian Cruise Line (NCL) for a 50% stake in the recapitalised company. Following the transaction, expected to be closed in 4Q07, Apollo will have three members on the NCL board, and Star Cruises will have two, giving Apollo effective control (although Star will retain "certain consent rights with respect to expenditures, acquisitions and divestitures, indebtedness, etc."). Proceeds will be used to pay down debt and increase liquidity for NCL's newbuilding programme. Also, Apollo and Star will enter into a sub-agreement related to NCL's US-flag Hawaii operations, providing for "deferred consideration to be paid to Star by NCL in the future". That agreement is designed to "support the [Hawaii] business in the near term and permit NCL America time to realise the benefits of various measures to raise yields and lower turnover". Apollo's $1Bn equity infusion, together with the Hawaii sub-agreement, implies a total enterprise value for NCL of about $4Bn. Apollo entered the cruise sector in February, when it acquired premium brand Oceania Cruises for $850M. According to a statement from NCL, its current management will be retained following the transaction, while Oceania is expected to remain a separate operating company and not be merged with NCL.