Princess Picks Carnival

Ratcliffe: ‘Our board has determined that the DLC proposed by Carnival would be financially superior to the DLC with Royal Caribbean.’

By: Theresa Norton Masek

P&O Princess Cruises has chosen Carnival Corp.

The London-based cruise company announced Friday that its board has withdrawn its recommendation of a merger with Royal Caribbean Cruises Ltd.

If the P&O Princess board and shareholders approve the Carnival offer, valued at about $5.4 billion, the deal will close in the first quarter of 2003.

P&O Princess began negotiating with Carnival, its once hostile suitor, after the U.S. Federal Trade Commission announced Oct. 4 that either the Carnival deal or the $3.7 million Royal Caribbean merger would be acceptable.

Carnival and P&O Princess have agreed to a “dual-listed company” (DLC) arrangement that would allow them to maintain stock listings in their respective countries. Carnival, a $13.5 billion company with six brands, is based in the United States; Princess P&O in Britain.

While some industry observers fear that further cruise consolidation will mean fewer choices and higher prices for travel agents and their clients, the FTC ruling said that neither transaction would harm consumers or restrain trade.

Also, analysts noted that Carnival tends to foster autonomy among its brands. Peter Ratcliffe, the CEO of P&O Princess, said, “Our board has determined that the DLC proposed by Carnival would be financially superior to the DLC with Royal Caribbean.

“With Carnival now committed to make their DLC offer, the board has decided to withdraw its recommendation of the Royal Caribbean proposal. We are also pleased to have been able to put in place arrangements for terminating our agreements with Royal Caribbean on an amicable basis.”

Royal Caribbean, a two-brand company valued at $2.9 billion, acknowledged the P&O Princess decision.

“Clearly, we regret that the board of P&O Princess is taking this action,” Richard Fain, the chairman and CEO of RCCL, said Friday. “We remain today as convinced as ever that the pairing of our two companies would be a great partnership and a great business. Ultimately, it is the shareholders of P&O Princess who must decide what is best for their company.”

The merger agreement, announced in November 2001, is scheduled to expire Jan. 1, RCCL said.

According to the P&O Princess announcement, its board and Carnival’s will have identical structures and the combined companies will be managed by a unified executive team.

“The structure would allow all shareholders to retain their exposure to the cruise industry and its significant growth potential in North America, Europe and the rest of the world,” the P&O board statement said.

“Combining Carnival and P&O Princess would create the leading company in the world, with a wide portfolio of complementary brands, including some of the best known and respected cruise brands in the world. Furthermore, the board believes that significant synergies would be realized by the combination.”

A combined Carnival/P&O Princess group would have 63 ships operating under 13 brands.

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