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The London-based cruise company announced Friday that its board
has withdrawn its recommendation of a merger with Royal Caribbean
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
A combined Carnival/P&O Princess group would have 63 ships
operating under 13 brands.