By John Woolfitt, Director at Atlantic Capital Markets
Viking Holdings announced on April 22nd that it is seeking to raise more than $1billion in a public offering to list on the New York Stock Exchange (NYSE) under the ticker VIK. This could be the second largest IPO of 2024 and would value the cruiseline operator at over $10bn.
Who are Viking Cruises?
In their own statement announcing the planned offering the company succinctly described itself as follows: “Viking was founded in 1997 and provides destination-focused journeys on rivers, oceans and lakes around the world. Designed for curious travellers with interests in science, history, culture and cuisine, Viking offers experiences for The Thinking Person.”
Viking has a fleet of 92 vessels and offers packages that visit all seven continents, including special expeditions to the Southern Antarctic and to the Arctic North. It is the last major cruise line operator in private hands and it has the world’s largest river cruise fleet at 80. It has 24 new ships on order, with options for an additional 12 more.
Viking Cruises has also started to enter new markets, such as China and elsewhere in Asia, and it sees significant growth potential over the long term and it plans to use the proceeds from the IPO to meet this growth potential and also to pay down its high debt burden which ballooned over the pandemic lockdowns.
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What about Viking Cruises’ financials?
As global travel continues to recover from the pandemic, revenue for Viking Cruises gained almost 50% to $4.7 billion last year. However it is quite highly leveraged, reporting $5.4 billion in total debt at the end of last year. With the company previously stating: “We have substantial indebtedness and we may not be able to generate sufficient cash to service all of our indebtedness or to obtain additional financing if necessary.”
Who are Viking’s competitors?
The main competition in the sector comes from Carnival Cruises NYSE:CCL and Royal Caribbean Group NYSE:RC although the major competitors have focused on sea cruises, where Viking Cruises currently only has 12 vessels. Viking Cruises is backed by major private equity groups and pension funds, such as the Canada Pension Plan Investment Board and UK based TPG Capital, with both set to own around 5% of the firm’s voting power after the IPO.
The IPO market continues to build and the year’s biggest IPO so far still belongs to the maker of Wilson tennis racquets, Amer Sport, which raised almost $1.4 billion back in February; however if Viking prices at the top of its range, it could come close to this with as much as $1.1 billion.
As the global economy continues to recover from the pandemic and as an ageing population increasingly returns to the travel market it is clear that the cruise line sector will be an attractive long term play. With some already suggesting that if it was not for the high debt burden Viking Cruises would already have become a takeover target.
Once listed this speculation is likely to grow and could be the exit strategy for the major private equity groups that have been supporting the group, giving additional support to this already widely anticipated IPO.
