Royal Caribbean Just Bought Half of Sandals for $3 Billion

How can investors take advantage of the new Sandals Royal Caribbean deal? Now they’ve announced that Royal Caribbean is buying half the business.

Royal Caribbean Group has agreed to acquire a 50 per cent stake in Sandals and Beaches Resorts for approximately US$3 billion.

That values the Jamaican-founded resort business at roughly six billion US dollars. The price is about ten times projected annual earnings before interest, taxes, depreciation and amortisation.

For Royal Caribbean, this is a major move beyond cruise ships and into the all-inclusive resort market. The company has secured debt financing for the investment and expects the transaction to boost earnings next year.

A few weeks before the announcement, Adam was on Taking Stock and I reminded him that he had said the group was not for sale and had no plans to list—that’s the family-business position Sandals had maintained for years. Then I asked whether outside investors might ever get a piece.

Kalilah: “So the answer is no? No opportunity for individual investors to own a piece of Sandals?”
Adam Stewart: “Well, I would say, never say never… We are always looking at doing what’s right for Sandals… We’ve looked at the sale of the business, we’ve looked at a majority sale, a minority sale, we looked at an IPO.”

So the public position was: not for sale, no listing. But Adam left the door open. This is not an IPO, so ordinary investors still cannot buy Sandals shares. Instead, Sandals has chosen one major strategic partner with global distribution, a huge customer base and an established loyalty programme.

Adam Stewart will remain executive chairman. He and Royal Caribbean CEO Jason Liberty will share leadership of the joint-venture board. Existing reservations, loyalty programmes and resort operations will continue as usual, while Sandals and Beaches keep their names and Caribbean identity.

So Sandals is giving up half its equity, but gaining the financial strength and global reach to expand faster. Royal Caribbean, meanwhile, gets immediate access to one of the Caribbean’s most valuable hospitality brands.

Investors who want indirect exposure to Sandals can buy Royal Caribbean Group shares on the New York Stock Exchange under the ticker RCL. The stock was trading around US$223 at the time of writing—down about 5% on the day, and nearly 37% below its February high.

And that’s the bottom line.

Do you think this partnership will strengthen Sandals—or change what makes the brand special?