NCL In Talks With Singapore's Star Cruises

One week after spurning an offer from industry leader Carnival Cruise Lines, Norwegian cruise ships operator NCL Holding ASA is in talks with Singapore's Star Cruises Plc. Miami-based Norwegian Cruise Line, the world's fourth-largest cruise operator, had rejected Carnival's 30 Norwegian crowns-a-share offer ($3.77) as too low and hinted rival takeover bids might surface. But NCL said it was not clear whether Star, the leading Asia-Pacific cruise line, would prove its savior. "Further information will be given if NCL receives a concrete bid from Star Cruises," NCL said. Carnival immediately challenged Star to come up with a better offer than its own made last week, which valued NCL at $884 million, or $1.7 billion with assumption of debt. Carnival spokesman Tim Gallagher said that the company was ready to sell its 4.3 million shares in NCL to any buyer willing to top its own offer, echoing similar comments made by Chairman Micky Arison. "It appears that what NCL is saying is that there is not an offer on the table," said Gallagher. "We do have an offer on the table, and, if someone comes along with a better offer, we'll tender our shares." However, Carnival shares were down $1-3/16 to $49-3/8 in U.S. trading, while American Depositary Receipts of NCL were up $1 at a year-high of $17-7/16, and NCL shares in Oslo closed at 34.90 crowns. Analysts' reaction was mixed, although most said that a marriage with Carnival would reap larger costs synergies. Star would gain the best advantages by immediately getting a strong foothold in the North American market, they said. "Star is an Asian operator and has a different profile of customers. You could not generate the same sort of cost synergies as would be available with Carnival," said one Oslo-based analyst. NCL said last week that in addition to Carnival, the world's largest cruise operator, two other cruise companies were "very interested" in it. It gave no names. Britain's P&O and Royal Caribbean Cruises Ltd. have said they did not plan a counter bid. Star Cruises says it will have a fleet of 12 vessels by 2005 and is among the world's top five operators. NCL Chairman Kristian Siem said last week that it would be a waste of time even to discuss the bid with Carnival. Carnival has said that it has no plans to raise the bid. Brokerage Pareto Fonds in Oslo said NCL shares could reach 75 to 100 crowns in the next two to three years, based on a strong recovery in earnings resulting from increased capacity and a pricing in line with peer operators. Analyst Per Didrik Leivdal said Carnival's offer was far too low. He said a link with NCL had much higher strategic value to Star than for Carnival. "Star can pay more. For Star it is an interesting strategic move. It's probably the last entry point into the North American market," Leivdal said.