December 17, 2001
Ever since P&O Princess and Royal Caribbean announced their plans to merge last month the real suspense has been over what Carnival will do. A comment by Mickey Arison, Carnival’s CEO, recently that the line, the world’s biggest – at least if and when the Princess/RCCL deal goes through – was definitely open to acquisitions. And indeed Carnival Corp. has officially entered the fray -- literally and figuratively -- making a $4.6 million hostile bid to acquire P&O Princess in an effort to derail the latter’s merger plans with Royal Caribbean. P&O Princess’ management has rejected the Carnival offer of cash and stock (the P&O/Royal Caribbean merger involves no exchange of either). P&O Princess shareholders are slated to vote on the merger with Royal Caribbean in January. In the meantime, Carnival has said it will bypass management and go directly to shareholders. However, Carnival’s offer presents more challenges -- particularly obtaining regulatory approval in the U.S. since the combined Carnival/P&O Princess would own 47 percent of the market) -- and so far existing P&O Princess stockholders have been quoted as saying they stand with management. If, indeed, P&O Princess shareholders abandoned their planned merger with Royal Caribbean in favor of the Carnival deal the company would owe RCCL a big chunk of cash. Under their agreement, the penalty for any cruise line that pulled out of the merger was a not-insignificant $67.5 million (and another $200 million for the southern Europe joint venture). Stay tuned for the next move in this executive-suite miniseries.