P&O Princess moves to calm City's fears over '£1bn poison pill' clause

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The Independent Online

P&O Princess Cruises last night moved to try to clarify the terms of the so-called "poison pill" arrangement in its recommended £5bn merger with Royal Caribbean amid growing concern in the City that the UK cruise operator may have disadvantaged its shareholders.

P&O Princess Cruises last night moved to try to clarify the terms of the so-called "poison pill" arrangement in its recommended £5bn merger with Royal Caribbean amid growing concern in the City that the UK cruise operator may have disadvantaged its shareholders.

Princess, which is fending off a £3.2bn hostile bid from Carnival Corporation, its larger US rival, opened the door for Carnival to increase its offer by spelling out how the joint venture set up to exploit the southern European cruise market could be terminated at no penalty cost to the US operator.

Analysts have criticised Princess for setting up the joint venture as a poison pill to deter Carnival from breaking up its arranged marriage with Royal Caribbean. A successful rival bid carries with it a penalty ranging from $500m (£347m) to as much as $1bn depending on how the joint venture is wound up.

However, commenting on a letter sent to shareholders, Peter Ratcliffe, Princess's chief executive, pointed out it was possible for Carnival to get around the joint venture. He said: "Within this letter we confirm that we may unilaterally terminate the joint venture in January 2003 at no cost as long as no change of control of P&O Princess has been completed before the termination date." This would allow Carnival to structure an offer on the assumption it closed on 2 January 2003 and the cost of winding up the joint venture was zero.

A spokesman for Carnival said the letter failed to address the possible recriminations if Princess were to deliberately not meet certain commercial benchmarks thereby enabling either party to terminate the joint venture. "Can Royal Caribbean sue?" asked the spokesman.

However, Princess ruled out the possibility that Royal Caribbean would be able to take legal action, adding the company had itself okayed the shareholders' letter. Under the terms of the joint venture, Princess can walk away if the joint venture has not taken bookings representing more than 15 per cent of its capacity for the August to December 2003 season. Princess spelt out that if a rival offer were to succeed before 1 January 2003, it would lose its termination rights and be subject to certain put and call arrangements resulting in the payment to Royal Caribbean.

The letter also reasserted that the extraordinary shareholders' meeting could not take place any later than 14 February, giving Carnival one week to increase its offer. Carnival has been putting pressure on Princess's shareholders to persuade the board to delay the meeting. P&O Princess shares closed up 3.75p at 398p.

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