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Monday, 18 February, 2002, 08:18 GMT
Princess investors delay merger vote
P&O cruise liner
Cruise operators struggle to stay afloat as tourism slumps
Shareholders in British cruise operator P&O Princess have voted to postpone a ballot on whether to merge with Miami-based Royal Caribbean.

The move clears the way for Princess shareholders to consider an alternative takeover bid from rival US cruise operator Carnival.


It would appear that P&O shareholders were voting with their pocketbooks

David Leibowitz, analyst at Burnham Financial Group
The adjournment, which required the support of shareholders holding a simple majority of Princess stock, was backed by investors holding 253 million shares, with 151.8 million cast against.

Carnival chief executive Micky Arison said he was "delighted" with the outcome.

"We would like to thank the P&O Princess shareholders for their support throughout this process, and look forward to welcoming them as shareholders of the enlarged Carnival group in the future," he said in a statement.

In the City, Princess shares edged slightly higher on Friday, climbing 2.75p to 401.75p before falling back to 390p, down 9p on the day.

Following the money

All three cruise firms are keen to consolidate in order to cut costs following the slump in tourism following 11 September.

The Princess/Royal Caribbean merger would create a $7bn (4.2bn) cruise liner operation, overtaking Carnival as the world's biggest cruise ship company.

Cruise holiday global market share
Carnival 29%
Royal Caribbean 23%
P&O Princess 10%

But Carnival's latest takeover offer, worth a total of $5.4bn, would hand more cash to Princess investors than the Royal Caribbean tie up.

"It would appear that P&O shareholders were voting with their pocketbooks," David Leibowitz, a cruise sector analyst at Burnham Financial Group in New York, told BBC News Online.

"The size of the majority (in favour of an adjournment) sends a loud message to all involved that the most recent Carnival offer merits serious consideration."

Walkout threat

Delaying the shareholder vote on the merger may prompt Royal Caribbean to pull out of the deal.

Princess and Royal Caribbean have signed an agreement which would oblige either side to pay the other $62.5m for breaking up the merger.

There has been speculation that Royal Caribbean may argue that the Princess investors' adjournment vote constitutes a breach of that agreement.

On Friday, Royal Caribbean said it would talk to its financial advisors before deciding on its next step, after its shareholders in turn voted to postpone their ballot on the Princess tie-up.

"We are obviously disappointed at the outcome of these meetings. However, we have to acknowledge that a shareholders' vote is a democratic process," said Royal Caribbean's chairman Richard Fain.

Shareholder split

Princess directors had urged shareholders to back the proposed tie-up with Royal Caribbean, arguing that the Carnival takeover is more likely to run into regulatory obstacles in Europe and the US.

Competition regulators in the US and the European Union are currently weighing up both proposed tie-ups.

Cruise holiday
Cruise bookings are down after 11 September

The Princess board has also suggested that Carnival's takeover bid stems more from an intent to scupper the Royal Caribbean/Princess merger than from any real desire to acquire Princess.

But supporters of a delay said final approval of the Royal Caribbean merger should wait until competition watchdogs have decided whether or not there are grounds for blocking either deal.

They believe that Royal Caribbean is unlikely to carry out its threat to pull out of the planned merger.

To pursue the Royal Caribbean tie-up, Princess would need the backing of 75% of shareholders who vote.

Princess is unlikely to call another shareholder vote until after the competition regulators have come to a decision, a process which could take up to a year.

"We are going to be in a state of limbo for several months," said Mr Leibowitz.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Angela Garvey
"Any deal would have to pass regulatory hurdles"
P&O chief executive Peter Radcliffe
"A combination with Royal will create significant value for both sets of shareholders"
The BBC's Alison Gee
"P&O's likely future could now rest with Carnival"
See also:

14 Feb 02 | Business
Valentine test for Princess tie-up
25 Jan 02 | Business
Carnival's hopes of winning P&O fade
22 Jan 02 | Business
Carnival to take P&O bid hostile
21 Jan 02 | Business
P&O rejects raised Carnival bid
17 Jan 02 | Business
Carnival ups P&O Princess bid
19 Dec 01 | Business
P&O fights to fend off Carnival
20 Nov 01 | Business
Cruise line operators to merge
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