FHL buys out South Sea Cruises
Fijian Holdings Limited acting group chief executive, Nouzab Fareed (left) with FHL board chairman, Iowane Naiveli, and South Sea Cruises managing director, Roger Dold at a press conference in Suva yesterday. Photo: RACHNA LAL
By RACHNA LAL
Fijian Holdings Limited (FHL) yesterday announced the acquisition of South Sea Cruises for a sum of $62.57 million – its largest acquisition in its 28 years of operations.
It was however not a simple transaction for the board of Fijian Holdings as it may seem.
To do this, Fijian Holding carried out three transactions:
- Divestment of 100 per cent of Blue Lagoon Cruises Holdings Limited to South Sea Cruises valued at $12.57m.
- Acquisition of 100 per cent of South Sea Cruises from Marine Tourism Holdings Limited valued at $62.57m which means they will now become a fully-owned subsidiary of Fijian Holdings.
- Signing a management agreement between South Sea Cruises and Cruise Whitsunday Pty Limited, a subsidiary of Marine Tourism Holdings for a period of eight years.
The acquisition is expected to allow Fijian Holdings to position itself in the tourism sector as a major player through the merger of South Sea Cruises and Blue Lagoon as one entity.
Fijian Holdings board chairman, Iowane Naiveli, said: “This investment accelerates our strategy in growing the FHL portfolio in strong sectors of the tourism market that will continue to perform and provide positive return on investment.”
Mr Naiveli stressed the Marine Tourism Holdings team would be working closely with the FHL team under the management agreement to allow FHL to maximise its return on their South Sea Cruises’ investment.
Position as tourism player
Fijian Holdings acting group chief executive, Nouzab Fareed, said South Sea Cruises would not only complement their investment in Blue Lagoon Cruises, but had positioned them as market leaders in this sector of the tourism industry.
“This will also provide the FHL Group opportunities to access further growth and business development,” he said.
Mr Fareed said the investment was expected to increase the group assets by $50m, group revenue by $35m and group earnings by $7m.
Mr Fareed said this transaction was important because Blue Lagoon Cruises had been struggling since FHL bought into it in 2001.
And while Blue Lagoon’s passenger numbers had never exceeded 10,000 for any given year since this acquisition, South Sea Cruises recorded 204,000 passengers for 2011 alone.
“South Sea Cruises is a market leader in this sector and is the country’s largest and most experienced marine tourism operator,” Mr Fareed said.
South Sea Cruises brands include Awesome Adventures and South Cruises. Following the transaction, these will continue as it is and Blue Lagoon Cruises will continue with its own brand.
Management structure model
The board of Fijian Holdings have adopted a similar management agreement model from the success of RB Patel Group Limited, where the initial owners continue to manage the business.
Mr Fareed also stressed based on their forecasted expectations of South Sea Cruises, the first few years were expected to be challenging with the repayment of the investment.
“However, we are positive that this will largely benefit shareholders in the not too distant future,” he said.
He also said following the initial payment of $10m, another $20m would be paid within the next 60 days and the rest would be spread within a period of seven years.
The combined entity is expected to handle in excess of 210,000 passengers in the coming year.
Fijian Holdings’ last investment was in RB Patel Group Limited in 2008.
Since then, the investment company has divested shares in a number of companies, including Clarity and Fiji Sun.
The management fee would be $200,000 per year plus 0.9 per cent of the gross revenue per year.
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