US cruise ship operator Carnival has launched a hostile takeover bid for its UK-based rival P&O Princess.
It came following a rejection by the P&O Princess board this weekend of a friendly shares and cash offer from Carnival worth GBP 3.2 billion.
“We believe that our proposal is in the best interest of P&O Princess Cruises` shareholders,” said Carnival Corporation Chairman and CEO, Micky Arison. “The proposed combination of Carnival Corporation and P&O Princess Cruises creates a global vacation and leisure company with an enhanced offering of complementary brands and greater geographic reach. We are offering P&O Princess Cruises` shareholders the opportunity to share in the future successes that we believe the combined management teams will bring to this enlarged group,” he explained. Arison went on to say that Carnival believed that the Royal Caribbean proposal would leave P&O Princess Cruises` shareholders with an investment in a less attractive entity with greater financial risk and on terms which give Royal Caribbean shareholders a greater proportion of the ownership of the combined group than is merited by its profit contribution to the combined group`s net income.
Carnival has made several approaches to P&O Princess Cruises in the past two years, most recently on September 24, 2001, less than 9 weeks before the proposed merger with Royal Caribbean was announced. “We were quite surprised by the announcement and its terms, particularly the break fee and Southern European Joint Venture, given that P&O Princess Cruises senior management ignored our approach although they were acutely aware of our ongoing keen interest in entering into discussions,” Arison said.
The Board of P&O Princess believes, and has been advised, that the Carnival proposal is not as favourable financially to P&O Princess shareholders and would face greater execution risk than the transaction with Royal Caribbean. In light of this, and in accordance with the terms of P&O Princess`s agreement with Royal Caribbean in relation to alternative proposals, the Board has communicated this in writing to Carnival. A summary of the principal terms of Carnival`s proposal is attached to this announcement. In particular, the Board believes that Carnival`s cash and share proposal:
—would not offer P&O Princess shareholders the value and upside potential which it expects will be generated by the DLC combination with Royal Caribbean
—does not represent an irrevocable commitment to make and maintain an offer and is subject to a number of pre-conditions, including financing and regulatory approvals
—would not permit P&O Princess shareholders to retain shares included in the FTSE All Share Index, resulting in potentially significant flowback
—is subject to greater regulatory risk in the United States and the European Union.
The Board, which is being advised by Schroder Salomon Smith Barney, therefore confirms that it continues to recommend the proposed combination with Royal Caribbean to shareholders.
Peter Ratcliffe, Chief Executive Officer of P&O Princess, said: “Our response to Carnival is based on two clear criteria - value for our shareholders and deliverability. Their proposal falls short on both counts. Through our combination with Royal Caribbean, our shareholders will participate in the significant benefits of creating a world leading competitor to rival Carnival.”
Lord Sterling of Plaistow, Chairman of P&O Princess, said: “We made it clear on announcing the Royal Caribbean combination that we were creating a truly formidable company that would go from strength to strength. Our response to Carnival simply recognises that their proposition will not deliver the same value for our shareholders.” The move has cast doubt over a planned merger between P&O Princess and Royal Caribbean Cruise Lines.