PHOTO: Norwegian Escape at sea.
Timothy Conder, a cruise industry analyst for Wells Fargo, asks the question a lot of people are: "What Is Going On at Norwegian?"
That's the headline on Conder's research note that came out several hours after Norwegian Cruise Line Holdings Ltd. (NCLH) announced that Frank Del Rio will replace Kevin Sheehan as CEO. Del Rio, who co-founded Oceania Cruises in 2002, was CEO of Prestige Cruise Holdings, which NCLH acquired in November.
"The announcement that President and CEO Kevin Sheehan is abruptly leaving NCLH and Frank Del Rio … is succeeding Sheehan is clearly a surprise," Conder wrote. "We believe Sheehan was staying at NCLH for five years post the IPO (three more years) and was NOT looking to leave."
The move raises many questions. Conder said some investors questioned the hiring of a chain restaurant executive, Drew Madsen, as president and COO of the Norwegian Cruise Line brand. Madsen previously worked at Darden Restaurants Inc., parent company to chains including Olive Garden, Yard House, LongHorn Steakhouse and Capital Grille.
Conder said he also "questioned the abrupt departure of Kunal Kamlani (former president and COO of Prestige) at the beginning of December" especially since "some had speculated Kamlani could have been a long-term successor candidate to Sheehan."
Conder also said Sheehan previously indicated he was staying put, quoting him as saying: "I'm not going anywhere and Drew will certainly help me move my agenda forward." So Conder wonders if there were issues regarding Madsen's hiring or problems from the integration of Prestige, which NCLH acquired for $3 billion in November.
The official press release from NCLH issued early Jan. 9 said Sheehan "has decided to leave the company." An 8-K form filed with the SEC on Jan. 9 said Sheehan resigned on Jan. 8. A separation agreement also filed with the SEC says Sheehan will receive a cash separation payment of $3,255,000 and his 2014 bonus of $1,627,500.
Del Rio, 60, was appointed president and CEO of NCLH on Jan. 8. When Norwegian's acquisition of Prestige was announced in September, Del Rio said he would stay on at least through 2015. But his contract extends through Dec. 31, 2018, according to a Nov. 19 SEC filing.
Conder described Del Rio as "a very capable and experienced industry executive" but wonders how long he will stay at NCLH and also whether he shared the same views as Sheehan for the integration of Prestige into NCLH.
Conder also raised the question of whether Del Rio's escalation would lead to Kamlani's return. Kamlani worked closely with Del Rio at Prestige, serving as CFO before departing to work at Bank of America/Merrill Lynch and then returning to Prestige in 2011 as president and COO.
He became president of Oceania in October 2011 and also took on the presidency of Regent Seven Seas Cruises in January 2013. He left Prestige Dec. 1 - the company said he resigned - and was replaced by Jason Montague.
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