For Immediate Release
4 October 2002
P&O Princess receives Federal Trade Commission clearance
Intends to have talks with Carnival
Highlights
* Today the United States Federal Trade Commission
announced that it would not oppose either the DLC
combination with Royal Caribbean or Carnival's takeover
proposal.
* The Board continues to believe that the agreed DLC
combination with Royal Caribbean will accelerate the
creation of value for P&O Princess shareholders, and the
Board continues to recommend that transaction.
* Now that one of its key original concerns,
deliverability on the regulatory front, has been removed,
the Board has re-examined the Carnival offers and focused on
Carnival's proposal to enter into a DLC combination as an
alternative to its share exchange offer.
* The Board considers the Carnival DLC alternative to be
more attractive than Carnival's share exchange offer because
many P&O Princess UK institutional shareholders would be
unwilling or unable to hold Carnival's US shares. For these
shareholders, the Carnival share exchange offer would be, in
effect, a forced cash sale at a time when the price they
would receive might not adequately reflect the full value of
the company's future prospects.
* After consulting with its advisers, the Board has
concluded that a DLC combination with Carnival is both
feasible and financially more attractive than the agreed DLC
combination with Royal Caribbean.
* Accordingly, as permitted by its agreement with Royal
Caribbean, the Board has decided to enter into talks with
Carnival to discuss Carnival's DLC proposal.
* In the meantime, P&O Princess is taking the necessary
steps to reconvene the adjourned EGM before November 16, the
termination date of the Royal Caribbean agreement.
* Together with Royal Caribbean, P&O Princess is
examining ways of changing their agreement so that their
combination can be approved by a simple majority vote,
putting the Royal Caribbean merger and the Carnival share
exchange offer on a more equal footing so far as shareholder
approval is concerned.
Peter Ratcliffe, Chief Executive of P&O Princess said today:
"We are pleased that the regulatory position is now clear.
"One of our principal concerns about the Carnival proposal -
namely deliverability on the regulatory front - has now been
removed. We have decided that we can and should begin
talking to them about their DLC proposal.
"We are focussing on the Carnival DLC alternative as many of
our shareholders are unable to hold the Carnival US shares
which they would receive in a share exchange offer and might
not get full value when they are forced to sell those
shares.
"Although we will be talking to Carnival, we continue to
believe that the agreed combination with Royal Caribbean
will accelerate the creation of value for our shareholders.
We have kept Royal Caribbean informed as to the Board's
deliberations and are working with them to reconvene the
EGM, ideally with a shareholder approval threshold on an
equal footing with the Carnival proposal.
"We are determined to do everything we can to ensure the
best possible future for P&O Princess and its employees and
to create the best value for our shareholders."
This summary should be read in conjunction with the full
text of this announcement which is set out below.
ENQUIRIES
P&O Princess Cruises plc +44 (0) 20 7805
1200
Caroline Keppel-Palmer +44 (0) 7730
732015
Schroder Salomon Smith Barney +44 (0) 20 7986
4000
Robert Swannell
Wendell Brooks
Peter Tague
Ian Hart
David James (Corporate Broking)
Credit Suisse First Boston (Europe) Ltd +44 (0) 20 7888
8888
Tom Reid (Corporate Broking)
Brunswick (London) +44(0) 20 7404
5959
John Sunnucks / Sophie Fitton
Brunswick (New York) +1 212 706 7867
Steve Lipin / Lauren Teggelaar
An interview with Peter Ratcliffe, Chief Executive Officer
is available in video, audio and text on www.cantos.com
or www.poprincesscruises.com
Website www.poprincesscruises.com
FTC clearance
P&O Princess Cruises plc ("P&O Princess" or the "Company")
notes the decision of the United States Federal Trade
Commission to clear both the agreed dual listed company
("DLC") combination with Royal Caribbean Cruises Ltd.
("Royal Caribbean") and Carnival Corporation's ("Carnival")
proposed acquisition of P&O Princess.
Royal Caribbean DLC combination
The Board of P&O Princess (the "Board") continues to believe
that the agreed DLC combination with Royal Caribbean will
accelerate the creation of value for P&O Princess
shareholders and notes that the only significant remaining
condition to the completion of the combination is approval
by the shareholders of each company.
Talks with Carnival
Now that the regulatory uncertainties have been removed, the
Board has re-examined the written offers made by Carnival
prior to the adjourned Extraordinary General Meeting
("EGM"). In those offers Carnival proposed, as an
alternative to its share exchange offer, a DLC combination
with P&O Princess on the same economic terms.
After consulting with its financial and legal advisers, the
Board has determined that a DLC combination with Carnival is
feasible and reasonably likely to be consummated. The Board
has also determined in consultation with its financial
advisers that, taking into account the potential synergies
for each transaction, a DLC with Carnival is more favourable
from a financial point of view to P&O Princess shareholders
than the agreed DLC combination with Royal Caribbean. As a
result, the Board has decided that it would be in the
interests of P&O Princess shareholders and the company for
P&O Princess to enter into talks with Carnival.
The implementation agreement with Royal Caribbean
specifically provides that P&O Princess may talk with a
third party bidder in these circumstances without breaching
the agreement or giving Royal Caribbean a termination right.
P&O Princess has notified Royal Caribbean of its decision to
have talks with Carnival.
Advantages of a DLC structure to P&O Princess shareholders
The Board has focused on the DLC alternative because it
would give all of P&O Princess' shareholders the opportunity
to retain their shares and participate in the future upside
potential of a combination with Carnival. By contrast, the
Board believes that many of P&O Princess' UK institutional
shareholders would be unable or unwilling to hold the
Carnival shares they would receive under the terms of
Carnival's share exchange offer because those shares would
not be included in the FTSE indices. For this significant
block of shareholders, the share exchange offer would, in
effect, be a forced cash sale at a time when the price they
would receive might not adequately reflect the full value of
the Company's future prospects.
The Board continues to believe the DLC Combination with
Royal Caribbean can be implemented without any adverse US
tax consequences. The Board also believes the same is true
for a DLC with Carnival and notes that, in any event,
Carnival's previously expressed concerns in this area should
have been eliminated by the changes to the "publicly traded"
test in the new draft Section 883 tax regulations.
It should be noted, however, that Carnival is not under any
Takeover Code or contractual obligation to enter into a DLC
with P&O Princess and there are issues relating to
Carnival's DLC proposal that P&O Princess would like to
explore in discussions with Carnival. Accordingly, the
Board is not in a position to recommend Carnival's current
DLC proposal.
Board recommendation
The Board hereby reconfirms its approval and recommendation
of the contractually committed DLC combination with Royal
Caribbean, as set out in the circular to P&O Princess
shareholders dated 27 December 2001, including the
conclusion that the Royal Caribbean combination is in the
best interests of P&O Princess shareholders as a whole.
As required by the Takeover Code, the Board, which has been
so advised by Schroder Salomon Smith Barney, confirms that
it considers the terms of the DLC combination with Royal
Caribbean to be fair and reasonable. In providing advice to
the Board, Schroder Salomon Smith Barney has taken into
account the Board's commercial assessments.
Horst Rahe, a non-executive director of P&O Princess, has
excused himself from Board decisions relating to these
transactions because he has a potential conflict of interest
arising from benefits he may obtain under change of control
provisions in the Aida Cruises sale and purchase agreement.
Shareholder approval
P&O Princess and Royal Caribbean are each taking the
necessary steps to reconvene their respective shareholder
meetings before 16 November, the first date on which either
party can terminate the implementation agreement. Further
information on the timing of the reconvened P&O Princess EGM
will be released in due course.
At present, the DLC Combination with Royal Caribbean must be
approved by a 75% vote of P&O Princess shareholders.
Although it currently has a 90% acceptance condition,
Carnival could declare its share exchange offer
unconditional if it is accepted by holders of a majority of
P&O Princess' shares.
Together with Royal Caribbean, P&O Princess is examining
ways of changing their agreement so that the combination of
their two businesses can be approved by a majority vote of
P&O Princess' shareholders. This change would put the Royal
Caribbean merger and the Carnival share exchange offer on a
more equal footing as far as shareholder approval is
concerned.
Profit forecast
In accordance with the provisions of the Takeover Code, P&O
Princess is now required to update its 2002 profit forecast
for the company on a stand alone basis, and to have the
forecast reported on by KPMG and Schroder Salomon Smith
Barney. Accordingly, P&O Princess intends to issue a
revised 2002 forecast, together with a trading update, on
Tuesday 8 October 2002.
A further announcement will be made in due course.
- ENDS -
The directors of P&O Princess accept responsibility for the
information contained in this announcement. To the best of
the knowledge and belief of the directors of P&O Princess
(who have taken all reasonable care to ensure that such is
the case), the information contained herein for which they
accept responsibility is in accordance with the facts and
does not omit anything likely to affect the import of such
information.
Salomon Brothers International Limited, trading as Schroder
Salomon Smith Barney ("Schroder Salomon Smith Barney") and
Credit Suisse First Boston (Europe) Limited are acting for
P&O Princess and no one else in connection with the matters
referred to herein and will not be responsible to any other
person for providing the protections afforded to clients of
Schroder Salomon Smith Barney or Credit Suisse First Boston
(Europe) Limited or for providing advice in relation to the
matters referred to herein.Salomon Brothers International
Limited (trading as Schroder Salomon Smith Barney) is
regulated in the United Kingdom by the Financial Services
Authority Limited. Salomon Smith Barney is a service mark
of Salomon Smith Barney Inc. Schroders is a trademark of
Schroders Holdings PLC and is used under licence.
Certain statements contained in this announcement are
``forward-looking statements'' that involve risks,
uncertainties and assumptions with respect to P&O Princess,
Royal Caribbean and Carnival and their respective
subsidiaries, including certain statements concerning the
transactions described herein, profit forecasts, working
capital, future results, strategies, plans and goals and
other events which have not yet occurred. These statements
are intended to qualify for the safe harbours from liability
provided by Section 27A of the US Securities Act of 1933, as
amended, and Section 21E of the US Securities Exchange Act
of 1934, as amended, which are part of the US Private
Securities Litigation Reform Act of 1995. You can find many
(but not all) of these statements by looking for words like
``will'', ``may'', ``believes'', ``expects'',
``anticipates'', ``plans'' and ``estimates'' and for similar
expressions. Because forward-looking statements involve
risks and uncertainties, there are many factors that could
cause the transactions described herein not to occur and/or
each of P&O Princess', Royal Caribbean's and Carnival's
actual results, performance or achievements to differ
materially from those expressed or implied in this
announcement. These include, but are not limited to,
regulatory and shareholder approvals, achievement of planned
synergies, economic and business conditions in general and,
conditions in the cruise, travel and vacation industries in
particular, including changes in industry cruise ship
capacity and competition from other cruise ship operators
and other vacation alternatives, safety and security
concerns, incidents at sea, weather conditions, the
political climate, fluctuations in interest rates,
fluctuations in the price of oil, changes in the tax and
regulatory regimes under which each company operates,
capital expenditures, and factors impacting each of P&O
Princess', Royal Caribbean's and Carnival's international
operations. In addition, the paragraph entitled ``Risk
Factors'' in Section 5 of the circular to P&O Princess
shareholders dated 27 December 2002 and each of P&O
Princess' and Royal Caribbean's Annual Reports on Form 20-F
and Carnival's Annual Report on Form 10-K filed with the US
Securities and Exchange Commission contain important
cautionary statements and a discussion of many of the
factors that could materially affect the accuracy of each
company's forward-looking statements and/or adversely affect
their respective businesses, results of operations and
financial position, which statements and factors are
incorporated herein by reference.
Subject to any continuing obligations under applicable law
or any relevant listing rules, P&O Princess expressly
disclaims any intention or obligation to disseminate, after
the date of this announcement, any updates or revisions to
any such forward-looking statements to reflect any change in
expectations or events, conditions or circumstances on which
any such statements are based.
"Schroder" is a trademark of Schroder Holdings PLC and is
used under licence by Salomon Brothers International
Limited.