P&O Princess Cruises plc and Royal Caribbean Cruises Ltd. have agreed to combine forces to create the world`s largest cruise vacation group with the most modern fleet among the major cruise companies.
The combination will be a merger of equals under a dual listed company structure. The combination has an aggregate market capitalisation of circa $6.0 billion as at 19 November 2001 and the following characteristics:
* Aggregate revenues of over $5 billion in the 12 months to 30 September 2001
* Served some 3 million customers in 2000 on a combined basis
* 41 ships and some 75,000 berths with presence in key vacation markets
* Leading positions in the Caribbean trade and destination trades, including Alaska, the Mediterranean, the Baltic and the Panama Canal
* Well known brands, including Royal Caribbean, Princess, Celebrity, P&O Cruises, Swan Hellenic, AIDA and A`ROSA
* Youngest fleet of the major cruise companies with an average age of six years, and largest ships, with an average of over 1,800 berths
* Estimated annualised operational synergies in excess of $100 million
* Combined group to be renamed on completion with the corporate entities of P&O Princess and Royal Caribbean each taking the new group name
* The combination is being effected based on current market capitalisations, resulting in Royal Caribbean representing 49.3% of the equity value of the combined group and P&O Princess representing 50.7% of the equity value of the combined group
Royal Caribbean and P&O Princess have also today established a joint venture to target customers in southern Europe.
Richard D. Fain, Chairman and Chief Executive Officer of Royal Caribbean Cruises and Chairman and Chief Executive Officer designate of the combined group, said:
“The combination of Royal Caribbean and P&O Princess will maximise our ability to take advantage of the long-term potential of our industry. This deal brings together well known brands and the youngest fleet in the industry to create a strong customer offering that will drive future growth both in existing and new markets. It also brings near-term cost savings and increased efficiencies that will help us respond to any short term challenges while building a stronger group. I am confident that shareholders in both companies will see real value created as a result.”
Peter Ratcliffe, Chief Executive Officer of P&O Princess Cruises and Managing Director and Chief Operating Officer designate of the combined group, said:
“Our industry has sustainable long term growth characteristics, despite the impact of recent events on short term trading. The key indicators of demographics, penetration, high levels of customer satisfaction and trends in leisure spend point to significant growth over the long term and the increasing globalisation of the industry. We will be well placed to benefit from this while reducing unit costs. With a high-quality fleet of over 40 ships, we will have the flexibility to respond to changes in demand around the world, open new markets, maximise the potential of our brands and benefit our customers and shareholders alike. These operational and strategic advantages will underpin this combination, both now and in the longer term.”
Lord Sterling of Plaistow, Chairman of P&O Princess Cruises, said: “This is an outstanding opportunity for both companies and a natural strategic combination. We obviously know each other well and I feel that our European and American heritages are a key to the future. Having personally been involved in the creation of P&O Princess out of the great liner division of The Peninsular and Oriental Steam Navigation Company, when I step down as Chairman in the next few months, I will have the pleasure of knowing that our people, both at sea and on shore, will have a tremendous future working together in this new global cruising enterprise. I have no doubt whatsoever that it will go from strength to strength.”
The combination will be achieved through a dual listed company (“DLC”) structure. The combined entity will be managed as a single, unified business with principal corporate headquarters in Miami, Florida and a significant corporate office in London. Appendix C contains a summary of the principal terms of the DLC. Richard D. Fain, currently Chairman and Chief Executive Officer of Royal Caribbean, will be Chairman and Chief Executive Officer of the combined group. Peter Ratcliffe, currently Chief Executive Officer of P&O
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Princess, will be Managing Director and Chief Operating Officer of the combined group.
Existing P&O Princess shareholders will, in aggregate, have economic ownership of 50.7% of the combined entity and existing Royal Caribbean shareholders will, in aggregate, have economic ownership of 49.3% of the combined entity. No shareholders in either company will need to exchange or tender their shares in order to effect the combination. Contractual arrangements between the two companies will ensure that distributions of both income and capital to shareholders take place in a “fixed equalization ratio”, subject to adjustment for certain events, which reflects the respective economic interest of the shareholders in the combined group. Under the terms of the combination, an existing Royal Caribbean share will have an economic interest equivalent to 3.46386 existing P&O Princess shares.
Principal trading markets following completion of the transaction will continue to be the New York and Oslo stock exchanges for Royal Caribbean and the London Stock Exchange for P&O Princess. Based on the closing prices of P&O Princess and Royal Caribbean shares on 19 November 2001, the aggregate market capitalisation of the combined entity is approximately $6.0 billion and the aggregate enterprise value of the combined group, based on 30 September 2001 balance sheets, is $11.8 billion. Aggregate EBITDA for the 12 months to 30 September 2001 exceeded $1.2 billion.