P&O Princess chief to scoop £1.1m from Carnival deal

The chief executive of P&O Princess Cruises stands to scoop £1.1m following the completion of a £3.5bn takeover deal by Carnival Corporation of the US that will create the world's biggest passenger cruise ship company.

Peter Ratcliffe, who has been offered one of three seats on the Carnival board to go to the UK group, is eligible for the payment under an awards scheme that was established when P&O Princess demerged from P&O two years ago. If he chose to exercise his share options, he would receive a further £550,000.

Mr Ratcliffe will lead the integration process, taking responsibility for the P&O Princess brands. He is expected to receive a remuneration package in line with the terms of his current contract, which pays him a base salary of $800,000 (£500,000) and an equivalent bonus.

Details of Mr Ratcliffe's incentive payment emerged as P&O Princess recommended that shareholders should back the creation of a dual-listed structure with Carnival. The move brings a 13-month bid saga a step nearer completion and comes less than three months after the UK group abandoned its original hopes of merging with Royal Caribbean, the world's second biggest cruise ship operator.

P&O Princess said the Carnival deal represented "a highly attractive opportunity" for its shareholders, as it allows UK investors to retain their stakes in the enlarged group, which will be listed in London and New York.

Mr Ratcliffe said he was satisfied despite the protracted nature of the deal. "We only demerged from P&O in October 2000. Our share price has increased from 290p to 440p since then – outperforming the UK stock market by 83 per cent," he added.

Mr Ratcliffe said he was "optimistic" that the deal would yield more than the anticipated $100m in cost savings. No job cuts are expected, with the exception of slimming down the P&O Princess head office. The two groups in 2001 had total sales of $7bn and operating profits of $1.2bn as of August 2002.

Under the new dual-listed structure the group will be managed and operated as a single economic enterprise, with its headquarters in Miami. Micky Arison will retain his current role of both chairman and chief executive of the enlarged group. P&O Princess will be renamed Carnival (UK), but the brands will remain.

Nick Luff, P&O Princess's finance director, has chosen not to stay at the enlarged group. He will leave after the deal is completed, in April, collecting a payoff worth £1.25m. This includes £600,000 that Mr Luff is entitled to under the incentive scheme established at the time of the demerger.

Lord Sterling of Plaistow, the group's chairman, confirmed he would retire on the deal's completion, although Carnival hopes to call on him for advice. He will receive £650,000 under the incentive scheme. Baroness Hogg and Sir John Parker, both on the P&O Princess board, take up the other two non-executive directorships on offer.

Although the European Commission will re-examine the deal, clearance is expected to be a formality, Mr Ratcliffe said. Both companies will hold shareholder votes at the end of March. P&O Princess shares fell 6.25p to 436.25p.