TUI and Royal Caribbean Cruises are plotting new ship orders after taking over Hapag-Lloyd Cruises in a €1.2bn ($1.31bn) deal.
Hapag-Lloyd Cruises, with five operational vessels, is being transferred to TUI Cruises, the 50:50 joint venture between the German tourism giant and the US cruise major.
The deal will allow it to focus on growth and synergies, the companies said.
Hapag-Lloyd Cruises was previously wholly owned by TUI.
The expected net cash payment to TUI is about €700m, including an earn-out element of €63m, payable if Hapag-Lloyd Cruises meets its earnings targets this year.
A TUI spokesman told TradeWinds that debt of just over €400m is also included in the deal and TUI and Royal Caribbean are each contributing €75m to TUI Cruises as new equity.
The deal is being financed mostly through bank lending.
He added that vessel orders will be placed in the coming months and years.
"We are getting a new expedition ship next year, and there is lot of demand in this sector, but we also want to expand in the luxury market," the spokesman said.
Royal Caribbean and TUI set up TUI Cruises in 2008. It has seven vessels.
The companies said Hapag-Lloyd Cruises "will be the second pillar of the successful joint venture, providing an ideal starting point for accelerated growth in TUI’s cruise division".
TUI's Marella Cruises operation in the UK was not included in the deal, and there is no intention of transferring it over, the spokesman added.
Proceeds from the takeover will be used to strengthen TUI's balance sheet and accelerate its digital transformation.
TUI chief executive Fritz Joussen added: “We’re changing the ownership structure behind the brand to facilitate stronger, faster and capital-light growth."
The deal is expected to be concluded this summer.
TUI will report 50% of Hapag-Lloyd Cruises' earnings.
Partnership expanding
TUI Cruises has three new large cruiseships being delivered in 2023, 2024 and 2026. It will continue to cater to the premium German-speaking segment, while Hapag-Lloyd Cruises will continue in the luxury and expedition ship segment.
The Hapag-Lloyd Cruises fleet comprises two luxury vessels and three expedition cruiseships.
"TUI and Royal Caribbean Cruises have developed the joint venture company on the basis of a strong partnership over the past 10 years. The expansion decision is the next big step of growth for us — from a strategic and a commercial perspective,” Joussen said.
TUI aims to tap into its US partner's shipbuilding, operational and digital expertise.
