Carnival ups P&O Princess bid to £3.8bn

Internal link

Outlook

Carnival Corporation yesterday raised its hostile bid for P&O Princess to £3.8bn in a final attempt to break up an agreed merger between the UK cruise ship operator and Royal Caribbean before Princess' shareholders meet to vote on the Royal deal.

But the US cruise giant warned it would only proceed with the offer if at least 15 per cent of shareholders backed its calls to adjourn Princess' meeting next week to approve the Royal merger. The increased offer, which valued Princess at 550p a share, followed a week of meetings between Carnival's board and Princess's largest institutional investors.

Howard Frank, Carnival's chief operating officer, said he was confident Carnival had done enough to count on the backing of Princess's major investors. "We have had a very good reception this week. Virtually all the shareholders supported our proposal," he said. The US company has given shareholders until 1pm today to support its motion to delay the EGM.

Princess's board met to discuss the revised offer and said that it would announce its decision in due course. The UK company has previously refused to meet Micky Arison, Carnival's chief executive, citing a non-solicitation clause in its agreement with Royal.

Observers said that despite the increase in value, it remained difficult to judge whether Carnival had done enough to sway shareholders, many of whom had previously favoured the certainty of a merger with Royal.

One analyst, who did not wish to be named, said: "People have started to waver. With 550p per share, Carnival has probably done enough given that people have found out that they can adjourn the meeting." Another said: "They clearly knew what price everyone wanted. They have done enough to get the 15 per cent. But the balance remains very close."

Earlier this week, Princess acknowledged that as long as a proposal to delay the meeting came from the floor, Royal would remain tied to the merger. For the vote to be delayed, however, at least 50 per cent of shareholders need to support the motion.

Royal has hinted heavily it would seek to abandon the merger if the meeting was delayed again. Richard Fain, Royal's chief executive, said: "In my view, this latest [offer] is no more real than the previous one. Carnival's goal is to scuttle our meeting, secure in the knowledge that any price offered will never need to be paid." His comments followed a warning from one of Royal's two largest investors that it would consider a vote for an adjournment "a vote for Carnival".

Despite closing up 6.5p at 409.5p, Princess's shares remain well below Carnival's offer price. This reflects the high level of regulatory risk that both proposals face and the high chance that neither will be cleared by antitrust authorities.

In an effort to allay concerns that Carnival was purposefully delaying filing its bid with the European Commission, Mr Frank said preliminary discussions with Brussels had gone "very well". Any offer from Carnival remains pre-conditional on regulatory clearance from both European and US authorities.

Carnival has been forbidden from increasing its offer again before 14 February, the date of the EGM, by the Takeover Panel, in order to give shareholders a chance to make up their minds. All proxy votes must be received by 11am on Tuesday morning.