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Royal Caribbean makes a $1 billion bet on luxury and expedition cruises

Key Points
  • Royal Caribbean will take a controlling stake in Silversea Cruises, a luxury cruise line, for $1 billion.
  • The deal allows Royal Caribbean to move into the luxury cruise line business, says CEO Richard Fain.
  • "We had this one gap in the ultra-luxury and expedition area," he says.
  • Royal Caribbean's stock was up more than 5 percent Thursday.
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Royal Caribbean buys controlling stake in luxury rival

The deal by Royal Caribbean Cruises to take a majority stake in Silversea Cruises allows the company to enter the luxury and expedition space, Royal Caribbean's chairman and CEO, Richard Fain, told CNBC.

"It's really a growth opportunity. It's a part of the market that we haven't really been addressing," Fain said Thursday on "Power Lunch."

"We had this one gap in the ultra-luxury and expedition area," he said. "We really needed to fill in that space."

On Thursday, Royal Caribbean announced it was purchasing a controlling stake — nearly 67 percent — in Silversea Cruises, a private company, for $1 billion. Silversea sails to all seven continents, including locales such as the Galapagos Islands, Antarctica and Russia's Far East. The cost of a cruise on Silversea can be well over $10,000.

The deal helps heighten the more affordable Royal Caribbean's presence in the ultra-luxury space and makes it easier for it to compete with rivals like Carnival Cruise Lines and Norwegian Cruise Line.

Fain said short term the acquisition won't have a big impact on business.

"But longer term — and we're a long-term business — this is where we ought to be," he said.

Royal Caribbean's stock was up more than 5 percent late afternoon Thursday.

The deal is expected to close later this year.