Business Combination

12 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Business Combination

Note 3. Business Combination

On July 31, 2018, we acquired a 66.7% equity stake ("the 2018 acquisition") in Silversea Cruise Holding Ltd. ("Silversea Cruises"), an ultra-luxury and expedition cruise line, from Heritage Cruise Holding Ltd. ("Heritage"), previously known as Silversea Cruises Group Ltd.

The purchase price for the 2018 acquisition consisted of $1.02 billion in cash, net of assumed liabilities, and contingent consideration due to Heritage for which any obligation was terminated upon our acquisition of the noncontrolling interest in 2020. The fair value of the contingent consideration at the time of the 2018 acquisition was $44.0 million. Changes to the fair value of the contingent consideration were recorded in our results of operations, if any, in the period of the change prior to its termination. Refer to Note 18. Fair Value Measurements and Derivative Instruments for further information on the valuation of the contingent consideration.

To finance a portion of the 2018 acquisition purchase price, we drew in full on a $700 million unsecured credit agreement and the remainder of the transaction consideration was financed through the use of our revolving credit facilities.

We have accounted for the Silversea Cruises acquisition under the provisions of ASC 805, Business Combinations. The purchase price for the 2018 acquisition was allocated based on estimates of the fair value of assets acquired and liabilities assumed at the acquisition date, with the excess allocated to goodwill. Goodwill is not deductible for tax purposes and consisted primarily of the opportunity to expand our cruise operations in strategic growth areas. Our purchase price allocation was final during 2019. There were no material measurement period adjustments recorded for the year ended December 31, 2019.

On July 9, 2020, we acquired the remaining 33.3% interest in Silversea Cruises that we did not already own (the "noncontrolling interest") from Heritage. As a result of the acquisition of the noncontrolling interest, Silversea Cruises is now a wholly owned cruise brand. As consideration for our acquisition of the noncontrolling interest, we issued to Heritage 5.2 million shares of common stock, par value $0.01 per share, of Royal Caribbean Cruises Ltd. Pursuant to the agreement governing the acquisition of the noncontrolling interest, among other things, the parties terminated any existing obligation to issue Heritage any contingent consideration, at fair value, in connection with the 2018 acquisition. The share purchase did not result in a change of control. The purchase was accounted for as an equity transaction and no gain or loss was recognized in earnings. Refer to Note 11. Redeemable Noncontrolling Interest to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information regarding our acquisition of the noncontrolling interest.

For reporting purposes, we included Silversea Cruises’ results of operations on a three-month reporting lag from October 1, 2019 through September 30, 2020 in our consolidated results of operations for the year ended December 31, 2020; from October 1, 2018 through September 30, 2019 in our consolidated results of operations for the year ended December 31, 2019 and from the July 31, 2018 date of acquisition through September 30, 2018 in our consolidated results of operations for the year ended December 31, 2018. We have included Silversea Cruises' balance sheets as of September 30, 2020 and 2019 in our consolidated balance sheets as of December 31, 2020 and 2019, respectively. Refer to Note 1. General for further information on this three-month reporting lag.