Carnival rules out sale of Cunard

Carnival Corporation, the American cruise operator that is locked in a hostile takeover battle for P&O Princess, yesterday said it would not sacrifice its famous Cunard Line in order to win control of its rival.

Instead Carnival, the world's biggest cruise company, said it would be willing to sell its target's UK arm, P&O Cruises UK, to meet competition regulators' concerns if the deal went through.

Carnival launched its hostile bid for P&O Princess last year in an attempt to wreck an agreed merger between Royal Caribbean and P&O Princess, the world's number two and three operators.

P&O Princess shareholders have decided to put the Royal Caribbean deal on hold to give regulators time to look at both bids.

According to reports last week, the sale of Cunard and its fleet including the Queen Elizabeth II was one of the conditions likely to be imposed by the European Commission in exchange for regulatory approval of the £4.6bn bid. Brussels is expected to announce a final decision by 19 August.

But in a statement issued to investors yesterday, Carnival insisted it "would not" consider disposing Cunard if it were forced to sell assets in Europe.

It pointed out it was investing $1.2bn (£822m) in Cunard which included the construction of the Queen Mary 2, which is set to be the world's largest passenger ship, and another smaller ship due to be delivered in 2005. "These two vessels ... demonstrate Carnival's full commitment to growing this world-recognised brand," it said. But it added: "Should it prove ultimately necessary Carnival would, in certain circumstances, be prepared to consider disposing of P&O Cruises UK."

P&O Cruises UK operates four ships in the British cruise market, competing with Carnival, Royal Caribbean and Norwegian Cruise Line.

Simon Champion, an analyst at Deutsche Bank, said: "The fact they are saying they are prepared to look at selling P&O Cruises UK shows how committed they are."

Alongside the European Commission inquiry, Britain is conducting its own review of the Royal Caribbean/P&O Princess deal.