Luxury cruise operators in £4.2bn merger

P&O Princess Cruises is to merge with US rival Royal Caribbean in a £4.2bn deal.

The UK group says the "merger of equals" will create the largest luxury cruise holiday firm in the world.

The merged group will boast 41 ships and 75,000 berths.

The cruise liner industry has been hit by the fall-out from the economic slump and the US terror attacks.

Peter Ratcliffe, chief executive of P&O Princess Cruises, says the industry has "long-term growth characteristics" despite the impact of recent events.

He adds: "With a high-quality fleet of over 40 ships, we will have the flexibility to respond to changes in demand around the world."

P&O Princess, which was demerged from P&O 13 months ago, will own 50.7% of the new group - with Royal Caribbean taking 49.3% of the equity value.

The merger is expected to deliver annual savings of about £69.4m in a year's time.

P&O Princess says savings will come from marketing efficiencies, improved purchasing, combining tour operations in Alaska and office rationalisation.

The combined group will employ 40,000 people. P&O Princess employs 19,000 staff, with 11,000 on its ships at any one time.