P&O Princess sticks by Royal Caribbean deal

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The Independent Online

The cruise ship operator P&O Princess, which is fending off a hostile bid from Carnival Corporation, yesterday revealed that earnings for 2001 would top previous forecasts as it again advised shareholders to back a proposed £4.8bn merger with Royal Caribbean.

Princess said that booking volumes had improved since being severely disrupted in the wake of 11 September, although prices remained below last year's levels.

In a trading update, which accompanied a circular to its shareholders, Princess said that basic earnings per share for 2001 would top 40 US cents a share, beating earlier estimates of 38 to 40 cents a share. However, its results for next year will hinge on the key January to March booking period, the company added.

The circular, which was issued in advance of an extraordinary meeting scheduled for 14 February, outlined the full details of the UK bid target's contractual obligations with Royal Caribbean.

This included a fair-dealing clause, which forbids Princess from talking to its US suitor unless it considered its bid to be superior. Peter Ratcliffe, Princess's chief executive, reiterated that the £3.2bn offer from Carnival "neither added value nor was deliverable".

Princess and Royal Caribbean also created a $2bn (£1.4bn) joint venture in southern Europe, which analysts have estimated would trigger a $200m payout if Carnival's bid succeeds before the end of 2002. However, the documents revealed the cost of breaking up the joint venture could be as much as $500m ­ the full value of Princess's equity investment in the venture. This is on top of a $62.5m poison pill break-fee.

A spokesman for Carnival said: "There isn't actually that much that is new. Nothing changes ­ we still think our deal provides better value for shareholders than the proposed merger." Among the conditions of Carnival's bid is that it gets regulatory approval. The US company is expected to release a statement today.

The document also revealed that the merger would cost Princess $35m in banking and legal advisors fees, while Royal Caribbean would pay $30m in similar fees.Princess's shares climbed 4.5p to 399.5p yesterday.