Princess/RCI Merger -- Q&A

November 27, 2001

Today marks a week since P&O Princess and Royal Caribbean made the most surprising announcement of the year. Their decision to merge has propelled the newly-joined partners into the world’s biggest cruise line. Beyond the financial statements there still isn’t much detail about what this will mean for travelers. “We learn more every day,” says Royal Caribbean’s Lynn Martenstein, “but we don’t have a lot of answers. Once we get past shareholder and regulatory clearance we can sit down and work out the details.”
The basics have, however, been decided. In our question-and-answer piece we
asked executives at P&O Princess and Royal Caribbean to shed light on areas
important to cruise aficionados.
Q: What does the merger mean?
A: At this point, the merger is about combining separate and disparate cruise line brands under one umbrella holding company. Think – Carnival Corp., for instance, which owns everything from Carnival to Holland America to Windstar to Costa (among others) and yet operates them separately and distinctly. “This is a merger of holding companies so none of the brands should be significantly impacted,” says P&O Princess’ Sophie Fitton. “They will continue to compete with each other.
Q: What are these brands?
P&O Princess has Princess, of course, and the British-run P&O. It’s also got
Swan Hellenic, a small ship line geared to learning-oriented cruises, the
German-oriented Aida Cruises and the recently launched A’Rosa, and P&O
Princess in Australia. Royal Caribbean has Celebrity.
Q: What’s the company’s name?
A: It hasn’t received an official moniker yet but the working title is RCP
Cruise Line. Pretty easy to figure out what the initials stand for.
Q: Is this a done deal?
A: Nope, not yet. Executives at the two companies still have to convince
shareholders and regulatory officials that it’s a good move for the cruise
lines and the industry respectively. Regulatory approval must be gained from
three countries -- the U.S., Great Britain and Germany. While they say they
are confident the deal will be approved it’s not a certainty until the
appropriate officials have signed on the dotted line (think the failed
United Airlines and US Airways merger -- which dissolved because it failed
to gain regulatory approval). If for any reason either of the two lines
pulls out it will have to pay $62.5 million to the one left behind.
Q: How long will it take?
A: Company officials say they expect it will be four to six months before
the official merger will occur. So if all goes well think “spring.”
Q: Who will run the cruise lines?
A: Actually, not much will change in this area. Richard Fain, Royal
Caribbean’s chairman and CEO and Peter Ratcliffe, P&O Princess’ CEO, will
head up the holding company but the individual presidents at each of the
cruise lines will continue to serve as the hands-on leaders.
Q: Where will the company be based?
A: Plans call for corporate headquarters of the holding company to be
located in Miami. Royal Caribbean will continue to operate out of its
existing office there while Princess will maintain its headquarters in
Southern California (as well as its Seattle office).
Q: I’m a shareholder. What does this mean for my stock?
A: Not much, actually. P&O Princess and Royal Caribbean will continue to
trade separately.
Q: As a Princess past passenger, does this mean I can use my credit on Royal
Caribbean or Celebrity? Or vice versa?
A: No one knows yet. These kind of operational details, including itinerary
changes, have not yet been decided on. “They are separate companies with
separate operations,” stresses Royal Caribbean’s Lynn Martenstein. “They’re
like two companies under a single management. Both are very successful at
what they do so there would not be a lot of incentive to change that.
Stay tuned and Cruise Critic will keep you posted as events unfold.