Norwegian Cruise Line Holdings and Activist Investor Agree to Board Change
Norwegian Cruise Line Holdings, the public parent company of the cruise lines, has reached a “cooperation agreement” with activist shareholder Elliott Investment Management that will see the company reconstitute its board of directors. Elliott had been calling for a change in the board and a new strategy to improve shareholder value at the cruise corporation.
Under the agreement, four long-time board members will step down as of March 31, and they will be replaced by five new independent directors mutually agreed upon between the company and Elliott. They agreed that John Chidsey, who was named President and Chief Executive Officer earlier in the month, will also become chairman. Elliott says it looks forward to working with him on the changes to the strategy and execution.
Elliott continues to emphasize that it sees potential for “significant value creation” at the corporation. It had previously been said that while the company had excellent ships, its strategy execution was poor, with costs too high. Announcing the agreement, they said they were confident the new board would help restore investor confidence and return the company to best-in-class financial performance.
“We are encouraged by our constructive engagement with John, and we look forward to working with him and the rest of the board as they drive the changes necessary to meaningfully improve operational execution and capitalize on the substantial opportunities at NCLH,” said Elliott Partner John Pike and Portfolio Manager Bobby Xu.
The company’s current chairperson, Stella David, and long-time directors David Abrams, Harry Curtis, and Rear Admiral Mary E. Landry (Ret.) are resigning, while two other current directors, Zillah Byng-Thorne and Linda P. Jojo, will remain active and will stand for re-election at the next shareholders’ meeting. Alex Cruz (former Chairman and CEO of British Airways), Kevin Lansberry (former EVP and CFO of Disney Experiences), Brian MacDonald (President and CEO of CDK Global, a technology company), Jonathan Cohen (CEO of Hepco Capital), and Steve Pagliuca (Managing Partner and Co-Chairman of Bain Capital) will join the board.
The NCLH board will be increased immediately to nine directors. Eight of them will qualify as independent. Further, under the cooperation agreement, NCLH and the Elliott Parties agreed they will use reasonable best efforts to identify an additional mutually agreeable independent director to be appointed on or before September 30, provided that the company determines it to be necessary and desirable to appoint an additional independent director in consultation with the Elliott Parties.
We are moving with urgency to strengthen the business and enhance execution,” said Chidsey. “There are significant opportunities to deliver stronger performance and sustainable value for our shareholders.”
The agreement was announced as Norwegian Cruise Line marked the introduction of its next new cruise, Norwegian Luna (154,140 gross, 3,565 passenger capacity), this week in Miami. The contemporary brand has another new ship due for delivery in 2027, as part of its long-term fleet enhancements that run until 2037, with a total of seven ships currently on order or under construction.
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In total, Norwegian Cruise Line Holdings has 17 additional new cruise ships on order, all with Fincantieri. It will be adding new ships to its luxury brands, Regent Seven Seas Cruises and Oceania Cruises. It is also catching up with its competitors with major enhancements due to be introduced later this year at its private island in the Bahamas.
With the cooperation agreement with Elliott, the company has reduced some of the pressure while it focuses on the desired enhancements to its financial performance. Elliott is well-known for its efforts at other companies, including its recent battle with Southwest Airlines and having taken on other giants, such as oil refiner Phillips 66, before announcing its 10 percent equity stake in NCLH. It also recently announced it has taken a significant position in Mitsui O.S.K. Lines.