Carnival Buys QE2, Parent Cunard Line

U.S. cruise behemoth Carnival Corp. on Friday is swallowing up the Queen Elizabeth 2 and its British parent Cunard Line--once a transatlantic transport titan--to create what would be the world’s largest luxury line.

Carnival, already the No. 1 cruising company, said it and minority partners were paying $500 million and would merge the five-ship Cunard Line with its Seabourn luxury-cruise operations, which Carnival owns with Norwegian businessman Atle Brynestad. The Miami-based cruise operator would own two-thirds of the combined company.

The purchase would give Carnival a bigger piece of the fast-growing cruise market, which has been spurred by increased consumer spending on leisure activities and the popular movie “Titanic.” Carnival is also one of the few companies to make a profit with luxury ships, analysts said.

“When most people think of Carnival, they think of cruising for the masses,” said Lazard Freres analyst James Winchester. “Cunard strengthens their ability to provide cruising for the elite.”

Carnival shares rose $2 to close at $74 in New York Stock Exchange trading. Carnival’s stock price has more than doubled from about $35 in the last year on strong demand for cruises.

Next week, Carnival will launch from Los Angeles its new 2,000-passenger mega-ship Elation, billed as the largest ship ever to be deployed on the West Coast.

Seller Kvaerner, an Anglo-Norwegian engineering and construction company, took control of Cunard two years ago in its acquisition of Trafalgar House and promptly put the money-losing line on the block.

Cunard--which in 1847 was the first line to offer regular British-U.S. passenger service--recently made money after years of losses. The company has seen steady consolidation among cruising companies building massive vessels with ever more exotic features.

The Norwegian group of investors includes Christiania Markets, a unit of Norwegian bank Christiania Bank Og Kreditkasse. Brynestad, the founder of Seabourn, is expected to be chairman of the merged company.

Carnival said it also reached an agreement for Kvaerner to develop a new class of ships for Cunard.