Green light for P&O

Click to follow
Both Brussels and the French competition authorities are set to give their blessing to the merger of P&O's cross-Channel business with Stena of Sweden in the next four weeks.

DG4, the EU's competition directorate, is understood to have raised no objections to the pounds 410m merger, which will see P&O take a 60 per cent stake. The joint venture will increase its market share of cross-Channel traffic to more than 40 per cent.

The French ministry of finance's competition department has signalled it is ready to accept the deal. The merger is significant for P&O as it will create a combined business which is likely to be able to defend itself against the inroads made by Eurotunnel.

Before fire disrupted Eurotunnel's freight business, it had captured 50 per cent of all Channel crossings. At present, without any freight, it is taking some 30 per cent of Channel crossings, through tourists and business travellers. Eurotunnel's market share is expected to rise to 60 per cent in due course. The P&O-Stena venture will have the lion's share of the rest.

When P&O announced the deal in October, it was welcomed by the City, but then rapidly put on hold when Ian Lang, then Secretary of State for Trade and Industry, referred it to the Monopolies and Mergers Commission.

However, the MMC is expected to give the green light, although there is a possibility it may ask for some undertakings. If the MMC gives its approval, the President of the Board of Trade, Margaret Beckett, will also have to concur.

Eurotunnel has already damaged the ferry operators. On its Dover-Calais services, passenger numbers fell from 2.86 million to 2.67 million in the third quarter of last year. In the first quarter of this year, because of the "fire effect", they rose from 1.57 million to 1.74 million.

Analysts now expect the ferries division to make profits of pounds 50m. Cost savings from the merger will amount to pounds 75m, estimates Nigel Davies, of stockbrokers Panmure Gordon.

The Tunnel is expected to reopen for full business later this month, or early in June - the same time as the merger clearance is expected.