Cruise line battle threatens Cunard

CRUISE line Carnival is prepared to sell Cunard with its flagship QE2 as the price of taking control of P&O Princess and foiling its planned merger with Royal Caribbean.

Micky Arison, the billionaire boss of Miami-based Carnival, is believed to be ready to offload the best-known name in shipping if European regulators demand it.

Sources close to the company believe that, to keep US regulators happy, Arison would also be prepared to sell Holland American Tours, which specialises in cruises to Alaska. Regulators on both sides of the Atlantic are concerned that a Carnival/P&O tie-up would give the combined company a virtual monopoly in European and Alaskan cruising.

But before Arison is in a position to make these offers, he faces a crucial vote by P&O's shareholders on Thursday -Valentine's Day. They are being asked to adjourn the meeting and consider Carnival's latest offer, which values P&O Princess at £3.8bn.

If shareholders back Carnival and agree to an adjournment, they would be voting against the P&O deal with Royal Caribbean and effectively saying yes to Carnival's higher, improved offer.

Richard Fain, chairman and chief executive of Royal Caribbean, threatened to walk away from his company's merger with P&O if shareholders-agreed to a delay. Arison was confident this weekend that he would win backing from a majority of the shareholders.

He said Carnival had received written assurances from institutions representing 30% of P&O shareholders that they would vote for an adjournment.

'Every institution we have met is in favour of a delay,' he said. 'They want to see that happen while the regulators make up their mind.' Arison dismissed P&O's rejection of his latest offer - Carnival's fourth - as typical of the company's negative tactics. It was like reading one of their press releases again,' he said.

But P&O chief executive Peter Ratcliffe said that while the latest offer was more realistic, there were still too many risks for shareholders because the regulatory hurdles were too high for a Carnival and P&O merger.