Royal Caribbean Group said it is selling its Azamara luxury cruise line for $201 million in cash to private-equity firm Sycamore Partners, a move that would let the company focus on core operations after almost a year since onboard coronavirus outbreaks brought voyages to a halt in the U.S.
The divestment is the latest downsizing move by a cruise company during the Covid-19 pandemic as operators look for additional sources of cash. Royal Caribbean Finance Chief Jason Liberty said the deal wasn’t driven by financial reasons and that it had considered selling the brand before the health crisis.
The company will seek to expand its core Royal Caribbean International, Celebrity Cruises and Silversea brands after the sale, according to Royal Caribbean, which also operates TUI Cruises and Hapag-Lloyd Cruises under a joint venture. Under the transaction, expected to close in the first quarter, Sycamore will acquire Azamara’s three ships and intellectual property such as the brand’s logo and slogan, the company added.
Royal Caribbean in December said it sold two ships in its Royal Caribbean International fleet. The company will come out of the deal with three fewer ships than its 61-ship fleet in 2019 after taking two ship deliveries and exiting a joint venture for Pullmantur Cruceros, which filed for reorganization under Spanish insolvency laws in 2020, a spokesman said.
“It allows us to really prioritize our resources, which are not just financial resources — it’s also the minds and time of management,” Mr. Liberty told The Wall Street Journal.
Azamara, established by Royal Caribbean in 2007, represents about 1.5% of its capacity and is the smallest among the company’s brands, according to its 2019 annual securities filing. Operating out of North America, the U.K. and Australia, Azamara’s ships are smaller than those in Royal Caribbean’s flagship line and sail to destinations including Asia, Europe, the Mediterranean and South America. The deal seeks to remove some overlap Azamara has with Celebrity and Silversea, both of which cater to affluent customers, Mr. Liberty said.
Carnival Corp., the world’s biggest cruise operator, last week said it was on track to sell 19 older ships, or roughly 13% of capacity before its sailing pause, speeding up its planned removal of ships. The company is set to post a loss of more than $2 billion for the quarter ended Nov. 30.
Along with the transaction, Royal Caribbean said it has tapped Azamara Chief Operating Officer Carol Cabezas as the brand president. Royal Caribbean and Sycamore declined to specify the number of employees transferring to Sycamore’s ownership.
Azamara’s sale will result in a noncash impairment charge of about $170 million, which reflects the difference between the three ships’ book value and the sale price, Royal Caribbean said. The company, which reported a loss of more than $1.3 billion for the September quarter, said it doesn’t expect the transaction to materially affect its future financial results. Like other operators, the company borrowed from banks and sold new bonds to investors as it burned about $300 million a month, with its ships in harbor and its reputation under fire.
Royal Caribbean has suspended U.S. and most global sailings through April 30 and pushed certain voyages later into the year, exacerbating its revenue drought. The timing for U.S. voyages ultimately depends on receiving a permit from the U.S. Centers for Disease Control and Prevention, which is requiring operators to conduct mock sailings and apply for a certificate at least 60 days before offering passenger cruises.
Write to Dave Sebastian at [email protected]