P&O Princess in $6bn merger

CRUISE group P&O Princess is to merge with Norwegian-owned rival Royal Caribbean Cruises in a $6bn (£4.1bn) all-share deal that will create the world's largest cruise company measured by passenger capacity.

P&O Princess shareholders will own 50.7% of the combined company, but Royal Caribbean chairman and chief executive Richard D Fain, 54, will take the top management position in the group. The group will adopt an new name, probably RCP Cruises, which has been used when discussing a deal first mooted by Fain a decade ago.

P&O Princess's chief executive Peter Ratcliffe will become chief operating officer and managing director, and the company's headquarters will move from London to Royal Caribbean's base in Miami.

The deal is expected to be completed in the second quarter of 2002, and the shares will be listed in the US, Oslo and London. P&O Princess shares rose 51 3/4p to 368 3/4p. The combined group's fleet will comprise 41 ships and 75,000 berths, leapfrogging Carnival's passenger capacity.

Fain said: 'This was an unusual and unique opportunity, and it is going to be breathtaking. It is certainly my hope that Carnival will look at this and say this is good for the industry. They are successful, we are successful and I hope everybody looks at it in that way.'

P&O Princess chairman Lord Sterling, due to step down next October from the helm of the P&O cruise operations, said the combined company would be well placed to weather the industry's problems. Ratcliffe said the deal would help the cruise industry to take a greater share of the European and US holiday market.

It is also expected to achieve $100m in annual savings by improved efficiencies including fleet redeployment, combined marketing and purchasing and integrating Alaskan cruise operations. The one-off cost of putting the two companies together is estimated at $50m, but no major job losses are expected.

'I think this move is good for the industry because it will accelerate growth on a global basis,' said Ratcliffe. 'Lord Sterling was instrumental in facilitating the demerger and in helping us reach this stage,' he said.

The breakdown penalty should the deal fall through is $62.5m, but the two companies intend to start a joint venture as an initial step. They will invest $500m and two new ships each in an offshoot targeting southern European customers.