Carnival hopes to remove conditions on Princess bid

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The Independent Online

Carnival Corporation is working on a plan to improve its £3.5bn takeover offer for P&O Princess Cruises, in a last -ditch attempt to sway shareholders in the UK-based company.

The US cruise ship giant is understood to be preparing to cut the number of conditions attached to its 502p-per-share offer, which Princess's directors rejected last week. Carnival is looking at ways to raise the 250p cash element of its cash-and-shares offer, although insiders signalled a substantial increase was unlikely.

A Carnival insider accepted the current proposal "ain't gonna swing it", given the weight of investor opinion against the US group. Time is running out for Carnival, headed by billionaire Mickey Arison, if it is to break up a nil-premium merger between Princess and Royal Caribbean, also of the US. Princess's shareholders are due to vote on the merger on 14 February.

Carnival's lawyers spent the weekend wrestling with ways to avoid the possibility of litigation from Royal if Princess managed to exit a "poison pill" joint venture without paying a penalty fee. The current hostile bid is conditional on Princess terminating the joint venture, set up to exploit the cruise market of Southern Europe, "without cost or liability".

Analysts have suggested Carnival could agree to suffer the knock to its investment- grade rating and pre-arrange the financing for the deal. The US company could also sweeten its offer with a show of intent, observers said. Princess has accused Carnival of being more interested in spoiling its £4.8bn merger with Royal than following through on its offer.

Any improved bid would need to be cleared by the UK Takeover Panel because it would have to remain conditional on antitrust clearance from Brussels and the US.

Princess will learn on Tuesday whether it can add regulatory approval from the Office of Fair Trading to that received from Germany. Both deals will come under antitrust scrutiny in the US.

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