Cruise ship takeover bid turns hostile

P&O Princess and Royal Caribbean would have 41 ships

US cruise ship operator Carnival has launched a hostile takeover bid for its UK-based rival P&O Princess.

The move has cast doubt over a planned merger between P&O Princess and Royal Caribbean.

It came following a rejection by the P&O Princess board this weekend of a friendly shares and cash offer from Carnival worth £3.2bn.

"The only thing we can do now is go direct to shareholders as the board has unilaterally turned us down without even giving us the chance to talk with them at any length," said Carnival vice chairman Howard Frank on Monday.

P&O Princess said it rejected Carnival's offer because it did not offer as much potential as the planned tie-up with Royal Caribbean.

The company added that a merger between P&O Princess and Carnival would be more likely to face objections from European or US competition authorities.

On the defensive

Analysts have interpreted Carnival's takeover bid as a defensive move.

The planned merger between P&O Princess and Royal Caribbean would create the world's biggest cruise ship operator, ousting Carnival from the top spot.

The new business would have a market value of about $6bn (£4.1bn), employing some 40,000 people.

It would offer cruises in the US, Australia, the Mediterranean and the Baltic Sea, with a fleet of over 40 ships.

In London, shares in P&O Princess were marked 6% higher at 390p in early trade.

P&O Princess' stock is due to be listed on the FTSE 100 index of leading UK shares, having posted strong gains in recent months.

Hard times

P&O Princess' strong performance comes despite tough trading conditions since the 11 September attacks in the US.

Many customers have cancelled bookings, preferring to stay closer to home.

Three months ago P&O Princess said the disruption caused by the terror attacks would cost it up to £3.4m.