Shares of Royal Caribbean Cruises (RCL) - Get Royal Caribbean Group Report fell in pre-market trading Friday, after the company announced it’s purchasing the one-third stake in luxury-expedition cruiser Silversea Cruises that it doesn't already own for $245 million of stock.
Royal Caribbean is buying the stake from Heritage Cruise Holding with 5.2 million shares of its common stock, accounting for 2.5% of Royal's shares outstanding.
Based on Thursday's closing price of $47.12, the 5.2 million Royal shares would be worth $245 million. That would put Silversea’s valuation at $735 million, a hefty discount to the $2 billion valuation it garnered when Royal bought its two-thirds stake in July 2018.
The cruise industry has been upended by the coronavirus pandemic, which hit several cruise ships and led to a total shutdown of the industry.
In March, Silversea saw its Silver Shadow ship barred from disembarking its passengers and crew in Brazil, as a passenger was suspected of having the coronavirus. Two passengers were later medically disembarked, and one of them tested positive.
Royal Caribbean expressed enthusiasm for its purchase Friday. "Silversea has been a great fit for our company from the very first day," Royal CEO Richard Fain said in a statement.
Manfredi Lefebvre d'Ovidio, who took over the company from his late father, will serve as chairman of Silversea. Roberto Martinoli will remain its president and CEO.
Perella Weinberg Partners served as financial advisor to Royal on the transaction.
Royal Caribbean shares stood at $47.25 up 0.3% in pre-market trading. The stock has plunged 65% year to date.