Carnival gets hostile

December 17, 2001 Posted: 1244 GMT

LONDON (CNN) -- The world's biggest cruise line operator, Carnival Corp. of the U.S., has formally launched a hostile $4.6 billion bid for one of its primary rivals.

The move comes after P&O Princess Cruises rejected Carnival's unsolicited offer over the weekend. Princess, the world's third largest cruise operator, already has a deal arranged with Royal Caribbean Cruise Lines, the second largest cruise line.

A sharp downturn in tourism, exacerbated by the September 11 attacks on the U.S., has driven cruise operators to seek alliances to cut costs, but P&O Princess said a deal with Carnival would meet massive regulatory obstacles and bring little value for shareholders.

On Monday, QE2 owner Carnival said the Princess rejection left it no option but to go directly to Princess shareholders.

Carnival Vice Chairman Howard Frank declined comment on whether Carnival would raise its cash-and-shares bid. Carnival Corp. Chairman and CEO Micky Arison said in a statement: "We believe our proposal is in the best interest of P&O Princess Cruises' shareholders.

"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." 

P&O Princess Cruises and Royal Caribbean Cruises announced in November they would merge in an attempt to save costs. The merger would form the world's largest cruise vacation group, with a market value of some $6 billion, and will save in excess of $100 million a year.

Cruise operators have been suffering since the attacks as many passengers cancelled trips, forcing operators to lower fares in an effort to win them back. In October, Royal Caribbean posted a 20 percent drop in third-quarter profits.

If the original deal goes ahead, P&O Princess would own 50.7 percent and Royal Caribbean would own 49.3 percent of the enlarged group, which would have a dual listed company structure similar to Royal Dutch Shell, the world's second-largest publicly traded oil company, and mining behemoth BHP Billiton.

Each Royal Caribbean share will be equivalent to about 3.46 shares in P&O Princess.

The combined group, based in Miami, Florida, would have a fleet of 41 ships and some 75,000 berths with leading positions in the Caribbean trade and destination trades, including Alaska, the Mediterranean, the Baltic and the Panama Canal.

Shares in P&O Princess, sailed 5.83 percent higher on Monday after it rejected Carnival's bid. Royal Caribbean Cruises shares were up 0.4 percent.