Earlier this week, Royal Caribbean (RCL) announced that it would sell two of its European brands, Pullmantur and Croisieres de France (CDF). These are local brands that had focused on the Spanish and French markets, respectively.
Who Are Pullmantur and CDF?
If you are a US consumer, chances are that you’ve never heard of either of these brands, but European cruisers know them well. Royal Caribbean bought Pullmantur in 2006 and created CDF as a subsidiary, with the first ship sailing in 2008. As cruise lines expanded last decade and began to focus on Europe, Carnival Corporation created (or bought) niche cruise lines targeted at individual countries, as opposed to Europe as a whole. RCL followed quickly with the two brands, but it lacked the global presence to make them profitable. Over the past decade, the European brands have been a drag on corporate profits, causing Royal Caribbean to look for an exit.
The Terms
RCL established a joint venture with Springwater Capital, a Spanish private equity firm, for the four ships involved. Springwater purchased 51% of the brands, with Royal Caribbean retaining the other 49%, as well as actual ownership of the ships (and planes) involved. The joint venture entity will lease the ships and planes from Royal Caribbean, who will receive compensation for them, as well as for marine operations.
The Why
The deal works out well for both parties. Royal Caribbean runs ships well, but it lacked the local European economies of scale and know-how to make the brands profitable. Springwater did not want the ships but, as a Spanish company with significant experience in the travel business, it knows the European markets well, with the entire entity under the Pullmantur parent. It can do a much better of marketing cruises than Royal Caribbean can. We don’t know how much the deal was for, but it couldn’t have been for very much as Royal Caribbean had written off virtually all the brand assets and described the one-time gain from sale as “immaterial.”
This is also not the first partnership between the two, as they have an existing agreement for tour operations and air transportation. The previous partnership likely made this one that much more likely. Over the next few years, we are likely to hear more about these brands. If the local markets pick up, the two could always fold the JV and pieces from their other agreements into one company and take it public.
There will likely be minimal in the operations of the ship. Rather, most of the changes that occur will take place behind the scenes and relate to how the brands are sold in their respective markets.
Photos from Creative Commons and Croisieres de France
