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Cruise operator Viking Holdings rose on its market debut, cementing billions of dollars in profits for two of the world’s largest investors and bolstering private equity firms’ hopes of exiting other long-held investments.
Shares of Bermuda-based Viking, which caters to 55-and-older English speakers and bans passengers under 18, surpassed $26 in early trading on Wednesday after pricing at $24 on Tuesday in an initial public offering worth $1.5bn. The stock price gave the company a market capitalisation of $11.5bn.
Strong demand from investors led Viking to increase the size of the deal twice before pricing for the second-largest IPO in the US this year, just behind the $1.6bn listing in February of Arc’teryx owner Amer Sports.
The upsized deal is likely to give hope to other private equity groups that are seeking to offload long-held investments, but have been concerned about the slow reopening of the IPO market after a two-year drought.
In March the flotation of private equity-backed beauty retailer Douglas in Germany was hailed as a “sigh of relief” by bankers, but its shares are trading about 15 per cent below its offer price. In New York, KKR-backed Brightspring Health is 18 per cent below its January IPO price.
Last week, however, shares in private equity firm CVC traded higher on their Amsterdam debut after its €2bn IPO was increased in size.
Globally, private equity firms are estimated to be sitting on some 28,000 unsold companies worth about $3tn, according to a report by Bain, the consultancy group.
US private equity group TPG and Canada’s largest pension fund, CPP Investments, accounted for most of the shares sold in Viking’s float.
The deal cements gains exceeding $1.5bn for each of the two groups according to calculations by the Financial Times. Both first invested in 2016 and added more funds during the pandemic. In total each put in about $680mn.
TPG and CPP declined to comment on their returns.
The additional equity injected during the pandemic helped Viking weather the severe downturn in better financial shape than listed rivals such as Carnival Cruise Lines and Royal Caribbean, which both took on substantial debt.
“Becoming a public company will increase our financial flexibility and may help us realise future opportunities,” founder Torstein Hagen said in a letter appended to Viking’s prospectus.
The listing on the New York Stock Exchange gives Norwegian-born Hagen a stake worth more than $5bn. A former cruise line executive and McKinsey Group partner, Hagen founded Viking Cruises in 1997 with four vessels running mostly on European river routes.
Now its 92-strong fleet makes river and ocean trips around the world. In 2022 the Viking Expedition, offering trips to the Earth’s poles, was launched.
The IPO proceeds include $264mn in funds for Viking that will cover tax obligations from the IPO as well as provide working capital.
The deal comes as the cruise industry emerges as one of the fastest-growing tourism sectors. This year 36mn passengers are expected to take a cruise, up 20 per cent from 2019, according to the Cruise Lines International Association.
The cruise line’s float brings the value of US IPOs so far this year to about $13.5bn, far more than the amount raised at the same point of either of the previous two years.
Bankers have cautioned that the market for public listings remains delicate and its recovery could easily be derailed by a few soured deals.
Later this week, Spanish beauty group Puig is due to list in Madrid in a deal worth up to €3bn in what should be the world’s largest IPO this year.
