M&A Roundup – An Unusual Contest For Control of NCL

As m&a continues at a frenetic pace, Carnival Corp.’s acquisition strategy is an example of the flexibility that companies need as the corporate mating dance remains in high gear. Shortly after being apparently outbid by Star Cruises in an effort to buy NCL Holding ASA, the parent company of Norwegian Cruise Lines, Carnival struck a $638.3 million deal to acquire Fairfield Communities Inc., a time-share vacation operator. “We have a corporate development staff that is always looking for opportunities,” said a Carnival spokesman. He also said that the company would have done the Fairfield deal regardless of the outcome of the NCL bid. But even while it was closing the Fairfield deal, it turned out that there were still options open at NCL. The contest started on December 1, 1999, as Carnival, the world’s largest cruise company, announced a hostile bid for NCL, the fourth-largest operator. NCL said the offer was too low, although it did represent a 32% premium over NCL’s share price just prior to the offer. After the Carnival announcement, Malaysia-based Star Cruises announced its own $1.1 billion, or 35 kronners per share, takeover bid for NCL. Carnival dropped out of the bidding, saying that it would not raise its offer above 30 kronners. However, Star ran into complications in closing the deal. Then, with an eleventh-hour invitation from NCL to reenter the contest, Carnival went from a hostile would-be acquirer to a white knight. In early February the rivals decided to joint buy NCL for $1.1 billion. In the end, Star will get 60% of NCL and will sell 40% to Carnival. The deal now awaits regulatory clearances, including U.S. antitrust approval. But despite the topsy-turvey ride, Carnival has kept its options open throughout. Analysts say that the company wasn’t pushed into doing the NCL deal. “This isn’t a deal Carnival had to do,” said Linda Bannister, a cruise industry analyst at Edward Jones brokerage in St. Louis. She noted that Carnival’s stock had been trading at near to its annual high, about $50.25, at the time when it looked like the deal had fallen through. Robin Farley, an analyst at Deutsche Bank, New York, said Carnival might opt to expand other areas of its travel business, such as its travel planning and tour agency operations.