Delayed reaction for cruise control

MAKE-up-your-mind time is fast approaching for shareholders in P&O Princess Cruises. Lord Sterling and his happy band of sailors are stepping up the knots in an attempt to persuade investors that the only real choice is to approve the 'combination' with Royal Caribbean at the St Valentine's Day egm at the Royal Lancaster Hotel in London.

The arguments for approving the deal, rather than seeking an adjournment, are on the surface attractive. Regulatory risk is clearly less in the key North American market if P&OP weds Royal Caribbean rather than allows itself to be swallowed by Miami-based competitor Carnival.

There must be concern that if the bid approval is adjourned, as Carnival wants, Royal, which is largely controlled by four closely linked shareholders, might walk. The P&OP board believes it has already delivered a much higher price for shareholders, and there is much more to come as the cruise market recovers and the traditional high share ratings in the sector return.

All of this is seductive. Moreover, Carnival has done itself no favours in the way that it has conducted its £3.6bn takeover offer. Mickey Arison of Carnival has been too willing to concede that he may not win.

His offer is largely in shares, which creates a real problem for British shareholders (including this one) who want to remain investors in the cruise market but do not want to hold American stock. Finally, there is the fear that Arison is engaged in a deal blocking game and may not be willing to see his bid through.

But equity and fairness demand that investors should be able to look at both deals for P&OP in parallel, allowing competition authorities on both sides of the Atlantic to rule, before locking themselves into a deal.

The only way of forcing that course of action is to vote for an adjournment before next week's deadline. That may seem risky to investors who prefer certainty in turbulent times. But if the future for cruising is as good as P&OP claims in the glossy document just posted, and if the recovery in holidays is underway and as healthy as Princess profits in the third quarter suggest (double at £22.1m), there is nothing to fear from delay.

P&OP, as the only freely-floating quoted cruise group - fought over by warring, family-dominated firms - will remain the industry's Valentine.

Nicoli's nasties

REMEMBER Tony Blair's 'Cool Britannia'? Nothing symbolised this more than our creative leadership in the music industry through EMI. Unfortunately, the stewardship of this national treasure since the departure of Sir Colin Southgate in 1999 has proved a disaster.

Warner and Bertelsmann must be thanking their lucky stars that they were blocked on competition grounds from absorbing this can of worms. Putting aside the high farce over pop diva Mariah Carey, two consecutive profits warnings have sent the shares plummeting.

EMI claims the latest profits warning is all part of the cleaning up process as former Polygram boss Alain Levy sets about turning around the recorded music business. If that is the case, chairman Eric Nicoli and Levy have an obligation to explain the new strategy to shareholders and analysts in detail. That is the very least that might be expected of a communications company.

Everyone accepts that the recording world has changed dramatically as a result of the internet, piracy and the decline in CDs. But EMI has the most glittering catalogue in the business, ranging from the Beatles to Snoop Dogg. At a time when content is in such strong demand, EMI should be thriving.

Non- executives led by Sir Dominic Cadbury should consider whether to relieve Nicoli of his executive command and complete the shake-up at the very top.

Hedge risks

SCARCELY a day passes without a fund manager somewhere entering the hedge fund business. John Duffield's New Star Management is among the latest to join this rush with a pledge to raise $200m (£141m) for a new European fund.

Official data shows high flows into hedge funds of £18bn in 2001, particularly into 'funds of funds' which invest in each other, a grisly prospect.

If anyone doubts the dangers, they should ask the Art Institute of Chicago. The Wall Street Journal reports that last year the trustees of this august body invested 6.6%, or £30m, of its £460m endowment with a hedge fund, in the hopes of improving returns. Instead it lost almost half the cash put in. This is a cautionary tale for all those taking the hedge fund route.