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Royal Caribbean, Springwater Capital to Form Joint Venture

Royal Caribbean Cruises Ltd. RCL announced a deal to form a joint venture with Madrid-based private equity firm, Springwater Capital. Under the terms of the agreement, both Royal Caribbean and Springwater will introduce cruises for Spanish and French tourists through the Pullmantur and Croisières de France cruise brands.

The joint venture is expected to close later in 2016, subject to certain conditions and regulatory approvals. It will result in a small one-time gain, which will be excluded from Royal Caribbean’s results. The negative impact of weak economic conditions in Pullmantur’s service territories on Royal Caribbean’s yields and expenses are expected to be offset to some extent. Although, this is contingent upon regulatory approvals and transaction closures, net effect on the company's 2016 earnings should be neutral to slightly positive.

The agreement also covers the sale of Royal Caribbean’s 51% stake in Pullmantur and Croisières de France to Springwater, while it retains the remaining 49% interest. Further, the Florida-based cruise operator will continue to have full ownership of the ships and planes presently operated by Pullmantur and Croisières de France. Apart from leasing these ships for the joint venture, Royal Caribbean will offer marine operations services to Pullmantur and Croisières de France through a management agreement.

The latest joint venture is aimed to build on an existing alliance between the two companies for the Wamos air transport, travel agency and tour operation businesses. It will also expand Springwater’s tourism portfolio, which includes investments in airline and travel company's in the countries of Spain, France and Portugal.

Royal Caribbean’s management believes that amid the ongoing economic recovery in Spain and growing demand for cruising in France, the company stands to benefit immensely from this joint venture. It would be further complemented by Springwater’s management expertise in Madrid and strong customer bases of the Pullmantur and Croisières de France cruise brands in Spain and France.

Royal Caribbean currently holds a Zacks Rank #2 (Buy). Other favorably placed stocks in the same industry include Six Flags Entertainment Corporation SIX, Vail Resorts Inc. MTN and The Marcus Corporation MCS, each carrying the same Zacks Rank as Royal Caribbean.

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