Princess Cruises into next stage of the battle

Weekly Corporate Growth Report, Sep 23, 2002

The Federal Trade Commission is expected to clear the two rival bids for P&O Princess Cruises PLC by the end of September. If this occurs, the battle for Princess Cruises will shift from an antitrust fight to a battle for shareholder votes.

Royal Caribbean Cruises Ltd. and Carnival Corp. are competing for Princess Cruises. Carnival is offering a mix of cash and stock valued at $5.4 billion. Royal Caribbean has proposed a complex, dual-listing structure that values P&O Princess at $3.4 billion. Under the dual-listing structure, the companies would remain separate (although a single management team would run them), and shareholders of P&O Princess would not exchange their stock for shares of Royal Caribbean. Instead, P&O shareholders would have a 50.7 percent economic interest, while holders of Royal Caribbean would retain the remaining 49.3 percent.

If it becomes a bidding war, Royal Caribbean will be at a disadvantage, since its bid would be harder to alter, and the company's debt load would make it difficult to attempt a traditional takeover. Royal Caribbean, however, has the only definitive offer on the table. This means that P&O shareholders can only hope that the Carnival offer remains open if they choose to reject the Royal Caribbean offer. Royal Caribbean is likely to argue that Carnival is more interested in preventing the sale to Royal Caribbean then in purchasing P&O Princess itself.