New Ships for ‘Love Boat’ Fleet : Princess Cruises to Acquire Sitmar in $210-Million Deal
Princess Cruises, the Los Angeles-based owner of a cruise ship fleet used in “The Love Boat” television series, has taken a corporate mate.
Sitmar Cruises, a Los Angeles-based cruise line operator, will merge with Princess under an agreement signed late Wednesday, the companies said Thursday. Under the agreement, Princess will acquire Sitmar’s operation--an existing four-ship fleet and three new Sitmar ships under construction--for $210 million. Princess already has a fleet of five ships.
Princess is owned by Peninsular & Oriental Steam Navigation Co., a British conglomerate. Sitmar is principally owned by the Vlasov Family Trust of Europe.
The deal will make the merged operation--the Princess name will continue but Sitmar will disappear sometime next year--one of the world’s leading cruise line operators, moving it from sixth or seventh into a virtual tie for second in passenger volume, according to executives at Princess.
After the merger, Princess Cruises will rival Miami-based Kloster Cruise Ltd., which has ranked behind industry leader Carnival Cruise Lines of Miami, according Hugh Scrimgeour, chief financial officer at Princess.
The merger will have no immediate effect on the companies’ separate reservations and cruise operations, which will not be consolidated until some time next year, according to Tim Harris, president of Princess. The current booking commitments of both companies will be honored, he said.
Harris also said the company has no plans to lay off employees. Princess has about 270 employees in Los Angeles and about 6,000 worldwide. Sitmar has 250 local employees and about 3,000 worldwide.
“One of the great advantages of a merger is that the company will be expanding,” Harris said, “and that means we wish to keep every good person we can get our hands on.”
Princess also plans to offer positions to Sitmar’s top management, he said, although their roles may be changed to prevent duplication at the merged company, Harris said.
The merger is designed to help Princess prepare for passenger growth in the industry, he said. While passenger volumes have been rising, capacity--driven up by new shipbuilding projects--has been rising even faster, according to industry analysts. For example, a study by Cruise Industry News, an industry newsletter, said the amount of space aboard cruise ships marketed in the United States will rise 11% in 1988, thus worsening an oversupply that already exists. The publication estimates that the oversupply will rise to 30% by the end of this year.
However, Harris said capacity and the demand for space will eventually balance out.
Oversupply and financial trends were not a factor in Sitmar’s decision to merge, according to Ted Blamey, president of Sitmar Cruises. Blamey said Sitmar--which has cruise destinations in South America, the Caribbean, Mexico, Canada and New England--has experienced a dropoff in passenger volume for its cruises to Panama because of the unsettled political situation in that country.
“It’s a shame . . . because people missed a good vacation (in Panama),” Blamey said. “But the financial situation (of Sitmar) was not a factor.” Neither Princess nor Sitmar officials would discuss the current profitability of their lines.
However, Oivand Mathisen, editor and publisher of the Cruise Industry News, said a “tough” financial situation was a factor in Sitmar’s decision.
“There will be more mergers,” he said. “It’s a very competitive situation.”
1988 capacity of North American cruise ship industry: 24.81 million passenger berth days.* 1988 Princess capacity: 1.406 million passenger berth days. Princess carries 100,000 to 150,000 passengers a year. 1988 Sitmar capacity: 1.043 million passenger berth days. Sitmar carries about 130,000 passengers a year. *Berth days, the industry’s measurement of capacity are figured by multiplying the total capacity of a line’s ships by 360.
