Branson Lures Bain To Virgin Cruises Venture

One of the world's biggest buyout funds is to inject hundreds of millions of dollars into a new cruise-line venture founded by Sir Richard Branson.

Sky News can exclusively reveal that Bain Capital, the private equity group which owns a stake in the Toys 'R' Us retail chain, has agreed to become a major shareholder in Virgin Cruises, the latest in a string of transport ventures set up by Sir Richard.

The disclosure of Bain Capital's investment in Virgin Cruises comes just weeks after the billionaire entrepreneur suffered a major setback with the fatal crash of a test-flight for his Virgin Galactic space tourism venture.

The accident did not, however, prevent the launch of two other deals involving Virgin-backed companies during the last fortnight: the listing in London of Virgin Money, albeit at a lower valuation than that which it had initially sought; and the New York flotation of Virgin America, the domestic US airline.

Sources said that Virgin Group would itself invest more than $100m (£63m) in shares in Virgin Cruises, using funds recycled from the proceeds of the two recent flotations.

Bain will also not be the only external shareholder, with at least one Middle East sovereign wealth fund and a number of family offices and high net worth individuals also believed to be participating, according to private equity sources.

Sky News revealed earlier this year that Virgin Group had appointed the US-based advisory firm Allen & Co to oversee the financing of a cruise operation that will aim to compete with industry giants including Carnival Corporation.

Details of the launch plans for Virgin Cruises remain sketchy, although it is thought likely to be targeting a maiden voyage in 2019 and be based in Miami.

Bankers said it would raise approximately £500m in equity and a debt package worth substantially more - possibly as much as £1bn.

In a recent interview with the Financial Times, Sir Richard said the ambition of the cruises operation was "to see whether we can attract people like myself who've never been on a cruise ship".

Two vessels are in the process of being commissioned and constructed, he added.

Sir Richard and Josh Bayliss, chief executive of Virgin Management, are understood to believe the global cruises sector possesses many of the same characteristics which have led Virgin to build a significant presence in sectors such as aviation, rail and mobile telecoms.

The cruise market is dominated by fewer than a handful of companies, such as the FTSE-100 group Carnival, Royal Caribbean and Norwegian. Between them, the three companies have a global market share of approximately 80%.

"Cruises is a classic Virgin market, dominated by two or three players and where the product needs to be refreshed," an insider told Sky News earlier this year.

The industry is forecast by Cruise Market Watch to grow from 21.5 million passengers this year to 22.2 million passengers carried worldwide in 2015.

Virgin Cruises is expected to be headquartered in the US, reflecting North America's status as the world's biggest cruise market, the source said.

Globally, the industry is forecast to generate revenue of $37.1bn (£22.2bn) this year, a 2.3% increase on 2013.

The plan for the launch of Virgin Cruises echoes a model deployed on numerous occasions by Sir Richard to rapidly build scale for new ventures, many of which, such as Virgin Mobile, have ended up being listed on stock markets.

He has also frequently sold stakes in his companies to outside investors, including the sale of shares in Virgin Money, his banking operation, to an entity in Abu Dhabi and Wilbur Ross, a prominent US investor.

Spokesmen for Bain Capital and Virgin Group declined to comment on Sunday.