Carnival, P&O Deal Nears Closure

Boards recommend approval of merger, now expected to be finalized in April

By: Theresa Norton Masek

P&O Princess Cruises took major steps forward last week, with both boards recommending approval and the final merger expected in April.

The deal would create one of the leading vacation companies in the world and the largest cruise group by far, with 65 ships offering 99,964 lower berths and another 18 ships to be added over the next three and a half years.

“It will have a whole array of leading consumer brands in every major cruise market in the world,” said Peter Ratcliffe, chief executive of P&O Princess. “We’ll also have the opportunity to reduce costs by taking advantage of the potential synergies between the two groups.”

As part of the transaction, P&O Princess will change its name to Carnival (UK) plc, although its brands will maintain their well-established names.

Carnival Chairman and CEO Micky Arison will remain in that role for the combined group, and Lord Sterling will retire as chairman of P&O Princess, a move he had planned but delayed until the takeover is completed.

Ratcliffe will serve as an executive director of both Carnival and P&O Princess, with oversight of the existing P&O brands Princess Cruises, P&O Cruises, Aida, A’Rosa, Swan Hellenic, Ocean Village and P&O Cruises (Australia). The headquarters of the combined group will be in Miami, with a corporate office in London.

The announcements did not specifically mention the headquarters of Princess Cruises in Santa Clarita, Calif. But both Ratcliffe and Arison said major layoffs are not expected at either line.

“This isn’t a redundancy story, although naturally that’s a question that’s asked,” Ratcliffe said. “This company will be growing by 45 percent over the next four years, so it’s a great opportunity for our staff.”

Although, he said, there inevitably “will be some changes that will take place.” One immediate casualty was Nick Luff, P&O Princess CFO; Arison wants Carnival’s CFO, Gerald Cahill, to assume that role for the combined group.

Cost savings of about $100 million are expected by combining purchasing and certain support functions, Ratcliffe said.

Because the original merger proposal has evolved into plans for a company that will be listed on both the New York and London exchanges, the European Commission will scrutinize the proposal again. But both companies say that this second review will be a formality, with approval expected in the first quarter. Ratcliffe said he hopes to circulate final documentation to P&O Princess shareholders by the end of February and to hold a meeting for final approval in early April.