Cunard moves to scuttle cruise merger deal

Cruise giant P&O Princess’s merger with Royal Caribbean was under threat today after Cunard owner Carnival moved to scuttle the deal.

US-based Carnival tabled its own pre-conditional £3.2bn offer for P&O in a bid to safeguard its status as the world’s biggest cruise firm.

P&O Princess immediately rejected the approach, although QE2 owner Carnival said it was prepared to go ‘‘hostile’’ and deal directly with shareholders.

Both tie-ups could still fall at various regulatory hurdles as the trio control an estimated 60% of the global market and 80% in the US.

Moves towards consolidation in the sector began last month when P&O Princess and Norwegian-owned Royal Caribbean agreed a ‘‘merger of equals’’.

With 41 ships and 40,000 staff covering the US, Australia, Mediterranean, Baltic and Panama Canal, the new company would rival the size of Carnival.

The proposed alliance comes as the industry faces up to the double blow dealt by the economic slowdown and the terrorist attacks on the US.

But it emerged today that Carnival first expressed an interest in joining forces with P&O Princess on September 24.

Carnival said it did not receive a response and had been surprised when the Royal Caribbean merger was announced eight weeks later.

Chief operating officer Howard Frank said: ‘‘It does not seem to make sense as to why they would not entertain our offer.’’

He added: ‘‘We approached them a couple of weeks after the September 11 attacks with the idea that the market had got considerably tougher. A merger of the two businesses would make sense.

‘‘In the short-term, there’s going to be great challenges, but in the long-term this is a great growth story.’’

The company’s offer values each P&O Princess share at 456p - a 27% premium to P&O’s closing price on Friday and 44% higher than the last day prior to the announcement of the Royal Caribbean proposal.

Carnival, which has a fleet of 43 ships, said its offer created an operation with ‘‘a broader, more diverse and more complementary portfolio of brands’’.

But P&O Princess told shareholders the proposal was not as favourable financially as its proposed tie-up with Royal Caribbean.

Chief executive Peter Ratcliffe said: ‘‘Our response to Carnival is based on two clear criteria - value for our shareholders and deliverability. Their proposal falls short on both counts.’’

P&O Princess will take a 50.7% stake in the proposed new operation with Royal Caribbean, given the working title RCP Cruise Liners.

Both companies will maintain their separate stock market listings under a structure similar to the one used by Anglo-Dutch oil giant Royal Dutch Shell.

The combined group will be based in Miami, Florida, but would also maintain a corporate office in London.

The merger could generate savings of $100m a year although ‘‘no significant’’ job cuts are expected.

P&O Princess shares rose nearly 6% to 380p following today’s developments.