The US cruise ship group Carnival may need to come up with a £500m show of intent, as well as an improved offer, if it is to enter into talks with the P&O Princess board.
Carnival, the industry leader, is trying to bust up an agreed $7bn (£4.9bn) merger between Royal Caribbean and P&O, the number two and three players.
There were reports this weekend that Carnival might have to put up a massive dowry, only to be returned if any formal offer for the British company is cleared by regulators.
P&O is convinced that Carnival, which has outlined a £3.2bn or 450p a share counter-offer, would never get clearance for its bid and fears the US group could be simply be coming in with a spoiling tactic. One industry source said: "There is no question that Carnival needs to show something to the P&O board that it is committed to closing a transaction, rather than just announcing one."
If it failed to get clearance, the £500m would be pocketed by P&O, as compensation for having been made to give up on the Royal Caribbean deal in favour of an offer that turns out to be unfeasible.
Officially, the terms of the P&O-Royal Caribbean deal do not allow the British company to "solicit" another offer. P&O cannot therefore put a series of demands to Carnival to elicit an acceptable bid, such as the £500m upfront payment.
P&O is allowed to talk to a third party if it receives a "superior and deliverable" offer but it must give Royal Caribbean 10 working days notice of such a development before opening discussions with that other party.
It is thought that Carnival must put something significant at risk – for instance a large break fee, £500m on deposit in an escrow account, or divestment commitments on buying P&O – to get its British target to take it seriously. One industry source said: "Putting up say £500m would be a way for Carnival to show they're committed. Otherwise it's putting all the regulatory risk with P&O." The British company has pointed to Carnival's history as evidence that is may lack commitment to follow through, even if it significantly improved its offer, which was rebuffed by P&O last month. It claims Carnival has consistently made counter-bids, in response to threatening deals, only to eventually walk away.
"It's very easy for Carnival to come back with a higher offer. But P&O needs to know that they mean it," the industry source said.
According to P&O, Carnival must come back with something better by 18 January. An extraordinary general meeting, for P&O shareholders to consider the Royal Caribbean deal, is scheduled for 14 February.Reuse content