US to extend inquiry into Carnival bid for Princess

Carnival Corporation yesterday received confirmation that obtaining regulatory approval for its £3.5bn takeover of P&O Princess Cruises would be an uphill battle after the US authorities extended their anti-trust investigation.

Carnival, which is fighting a hostile bid battle for the UK-based Princess, said that the US Federal Trade Commission had ordered a phase two investigation of its 500p-a-share offer, which is pre-conditional on regulatory approval.

The US cruise ship giant played down the significance of the extension while reminding Princess's investors that the UK company's preferred £4.8bn merger with Royal Caribbean was subject to the same regulatory process.

It said: "This expected action continues to keep both the Carnival offer and the Royal Caribbean proposal under review at the FTC at the same time, on the same timetable and by the same lawyers and economists, who will apply the same legal standards and analysis to both proposals based on the same information."

Princess, which increased the tension in the already fraught bid battle after it rejected Carnival's increased proposal on Monday, said it was still providing information to the FTC regarding its merger with Royal. Because no assets change hands in the Princess deal, the transaction does not fall under the official US anti-trust process. However, the deal, which would join the world's second and third largest cruise companies, is subject to the same regulatory issues in the US as Carnival's. Princess's shares fell 9p to 386p, reflecting concern that the regulators could block both deals.

Carnival added that it continued to believe that "there is no material difference between the regulatory conditions" attached to the two deals. Sources close to Princess hit out at Carnival's choice of the phrase "regulatory conditions", suggesting that the US cruise company was trying to gloss over the real risks that it faced in gaining anti-trust approval.

Both deals must also be cleared by authorities in Europe. Princess needs to add regulatory approval from Britain to that already obtained from Germany, while Carnival must take its deal to Brussels. A Carnival spokesman confirmed that the group had entered talks with the European Commission and that it would file its deal "in the coming weeks".

Meanwhile, a Royal Caribbean shareholder has filed a lawsuit in Miami, Florida, against the company. Bernard Stern is suing Royal over claims that the merger with Princess would expose the companies to punitive US tax liabilities. Insiders at Royal dismissed the potential implications.