Carnival raises takeover offer for P&O Princess to 500p a share

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The Independent Online

The US cruise ship giant Carnival Corporation yesterday raised its takeover offer for P&O Princess Cruises to 500p a share in a fresh attempt to break up a pre-agreed £5bn merger between the UK cruise operator and Royal Caribbean.

The bid, which was announced after the markets had closed, is 12 per cent higher than Carnival's earlier offer and values Princess at about £3.5bn. The US company also relaxed a number of the pre-conditions attached to its previous offer.

Mickey Arison, Carnival's chairman and chief executive, stressed the increased offer hinged on Princess's ability to ensure that a joint venture set up with Royal Caribbean to target the Southern European market could be wound up in 2003 "without cost or liability". Mr Arison again asked for additional information from Princess about how this could be achieved. Carnival has estimated the penalty cost of a rival bid for Princess would be between $500m (£347m) and$1bn depending on how the joint venture is wound up.

Princess, which had set Carnival a deadline of today to come back with a higher offer, said it "was pleased" Carnival had met its timetable. "The board will consider this proposal in detail and will make a further announcement in due course," it said.

Carnival repeated that its offer was dependent upon gaining regulatory approval from the US and European authorities and on obtaining the necessary financing. It comprises 250p in cash and 0.138 Carnival shares for every Princess share.

In a letter to Lord Stirling, Princess's chairman, and Peter Ratcliffe, its chief executive, Mr Arison said: "We firmly believe that our revised offer is a superior proposal to the Royal Caribbean proposal." He made it clear that unless Princess acknowledged the superiority of his bid, Carnival would urge Princess's shareholders to vote to adjourn the extraordinary meeting scheduled for 14 February or vote against merging with Royal Caribbean.

One UK fund manager said that Carnival's response "was enough to demonstrate serious intent", erasing Mr Ratcliffe's fears that Carnival was looking only to spoil the Royal Caribbean deal. "Quite a few shareholders will welcome the fact that now we have a serious alternative. They can probably improve on this but I see grounds for the meeting to be adjourned further," the fund manager said.

One analyst said: "Most people had been holding out for at least 500p, I would have thought that would have satisfied the board." However, another analyst said Carnival needed to offer about 540p before Princess's board would listen.

Carnival also said there were doubts about the tax benefits assumed under the dual-listed merger planned by Princess and Royal Caribbean.

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