Carnival Lines Adds to Its Cruise Ship Empire

MIAMI — Carnival Cruise Lines Inc., moving to bolster its position in the cruise industry, said Wednesday that it has agreed to buy 70% of Royal Caribbean and Admiral Cruise Lines for $550 million in cash.

Carnival, which was the world’s largest line in 1987 based on the number of passengers carried, said on Aug. 17 that it had agreed to buy a 36% position in the two lines from Gotaas-Larsen Shipping Corp. However, in Wednesday’s announcement the Miami-based company said it will increase that stake through additional purchases from I. M. Skaugen A/S, Jonnson Line AB and EFFOA-Finland Steamship Co. Ltd.

Carnival, known as the cruise line for the masses, has become a success by offering low-priced air-and-sea packages. Through heavy advertising, Carnival is the most visible of cruise lines. Its all-inclusive prices are about 20% below the competition’s.

When it announced its agreement to buy 36% of Royal Caribbean and Admiral Cruise lines, it made no secret of the fact it wanted a larger stake in the lines.

The company’s plan is to gain strength in market segments that are higher and lower priced than its own middle-ranged niche. Royal Caribbean’s prices are higher than Carnival’s while Admiral’s are lower.

Sail Under Norwegian Flag

“It is our intention to operate our three cruise lines as separate brands, with no plans for merging these entities,” said Micky Arison, president of Carnival, in a statement. He is the son of Carnival’s founder, Ted Arison, an Israeli immigrant.

Royal Caribbean Cruise Lines’ five vessels are the only major cruise ships still operating under the Norwegian flag, Arison said. He said he plans for the ships to continue operating under that flag.

Admiral Cruises, which sails under a Bahamian flag, operates three ships on the Pacific coast and in the Caribbean and a fourth ship in under construction.

Royal Caribbean and Admiral Cruise, both based in Miami, agreed to merge earlier this year under a holding company Royal Admiral Cruises Ltd. That agreement requires approval by the Norwegian government, which is expected shortly.

The latest purchase is part of the rapid expansion of Carnival’s cruise-line empire. The fastest growing line in the industry, Carnival is in the middle of a $600-million shipbuilding program to add three new liners at the rate of a ship a year starting in November. It is also planning three luxury liners to carry about 700 passengers each, and to be marketed under a different name.

Also Operates Casino

Its expansion comes at a time when the industry is consolidating mostly due to overcapacity in the more expensive end of the market.

Carnival currently operates seven ships sailing on three, four and seven-day cruises to the Bahamas, the Caribbean and Mexican Riviera. The company also operates a casino in the Bahamas and has under construction an 867-room luxury hotel adjacent to its casino to be known as Carnival’s Crystal Palace Resort & Casino in Nassau’s Cable Beach. The Palace Resort will be the largest resort in the Caribbean. The first part of the hotel is scheduled to open in December.