For Immediate Release
P&O Princess Cruises plc
25 October 2002
Welcomes Carnival DLC proposal
Withdraws recommendation of Royal Caribbean DLC proposal
Amicable arrangements for termination of existing
agreements with Royal Caribbean
The Board of P&O Princess Cruises plc ("P&O Princess")
welcomes the announcement today from Carnival Corporation
("Carnival") of its commitment to make an offer of a dual
listed company ("DLC") combination with P&O Princess. This
offer is subject to the Takeover Code and is dependent upon
satisfaction of certain pre-conditions. This proposal from
Carnival comes after two weeks of productive negotiations,
which were initiated by P&O Princess after FTC approval was
received.
Carnival DLC Proposal
Full details of the Carnival DLC proposal are included in
Carnival's announcement. A copy of that announcement will
be sent to P&O Princess shareholders shortly and will be
placed on the Carnival website (www.carnivalcorp.com) in due
course. In summary, the Carnival proposal provides for:
* The formation of a DLC in which each P&O Princess share
would be equivalent to 0.3004 Carnival shares, the same
ratio as in Carnival's existing share exchange offer (the
"Existing Share Exchange Offer") which was announced on 7
February 2002.
* A partial share offer that would enable P&O Princess
shareholders to exchange their existing P&O Princess shares
for newly issued Carnival shares on the basis of 0.3004 new
Carnival shares for each P&O Princess share (the "Partial
Share Offer"). The Partial Share Offer is limited in
aggregate to a maximum of 20 per cent. of P&O Princess'
issued share capital and will provide for pro ration if
acceptances exceed this limit.
* A DLC structure in which the boards of Carnival and P&O
Princess would be identical, with the combined companies
managed by a unified executive management team. The DLC
agreements between the two companies would align their
economic interests and enable them to operate as a single
economic enterprise.
* The expected continuation of the existing primary
listings of Carnival on the NYSE and P&O Princess on the
London Stock Exchange and the existing index participation
of Carnival in the S&P 500 and of P&O Princess in the FTSE
100, subject to the normal approvals.
* Depending on the extent to which the Partial Share
Offer is accepted, between 21 per cent. and 26 per cent. of
the economic and voting interest in the combined entity
would be represented by the P&O Princess shares listed on
the London Stock Exchange. Based on yesterday's closing
price this would translate into an aggregate market
capitalisation of between GBP2.6 billion and GBP3.2 billion.
If Carnival's DLC offer is accepted and approved by the
Board and shareholders of P&O Princess, completion of
Carnival's DLC proposal would be expected to occur during
the first quarter of 2003.
Carnival's offer is subject to a number of pre-conditions
which are within the control of P&O Princess and its
shareholders. These are:
* the P&O Princess board withdrawing its recommendation
of the Royal Caribbean DLC proposal within 48 hours after
Carnival's announcement and not reinstating that
recommendation;
* the Royal Caribbean DLC being abandoned;
* the joint venture between P&O Princess and Royal
Caribbean being terminated as described in Carnival's
announcement; and
* P&O Princess accepting, and its Board approving and
recommending, the Carnival DLC offer.
If these preconditions are not satisfied or waived by 10
January 2003 then the DLC offer would not be made and
Carnival would be obliged to proceed with its Existing Share
Exchange Offer.
In addition, Carnival will be permitted to withdraw its DLC
offer prior to 10 January, 2003 in certain limited
circumstances, including if: (i) the Board announces that it
is not going to recommend Carnival's DLC proposal; (ii) the
Board recommends a competing offer; or (iii) a third party
makes an offer subject to the Takeover Code, or otherwise
legally binding, which Carnival reasonably determines is
likely to be more attractive to P&O Princess shareholders
than its DLC offer. In these circumstances, if it chooses
to withdraw its DLC offer, Carnival would be obliged to
proceed with its Existing Share Exchange Offer.
Assuming the pre-conditions are satisfied or waived and
Carnival's DLC offer is made and accepted by P&O Princess,
Carnival will not be obliged to, and will not, proceed with
the Existing Share Exchange Offer. In particular, if P&O
Princess' shareholders do not approve Carnival's DLC offer
at the Extraordinary General Meeting held for that purpose,
the Existing Share Exchange Offer would not be re-instated.
P&O Princess' welcomes Carnival's proposal
The Board welcomes Carnival's DLC proposal because:
* by offering a DLC, Carnival have committed to a
takeover structure that allows those P&O Princess
shareholders who are unable or unwilling to hold US-listed
shares to retain their interest in the combination. This
avoids the prospect of these shareholders being forced to
sell for cash at a time not of their choosing and when it
might not be in their best interests to do so; and
* by offering a partial share exchange alternative
Carnival have also sought to accommodate those P&O Princess
shareholders who would prefer to hold their interest in the
combination in the form of US-listed shares.
The Board believes that a DLC combination with Carnival
would be an attractive opportunity for P&O Princess
shareholders. The structure would allow all shareholders to
retain their exposure to the cruise industry and its
significant growth potential in North America, Europe and
the rest of the world. Combining Carnival and P&O Princess
would create the leading company in the industry, with a
wide portfolio of complementary brands, including some of
the best known and respected cruise brands in the world.
Furthermore, the Board believes that significant synergies
would be realised by the combination.
The Board notes that the Carnival DLC would be structured in
broadly the same way as the proposed DLC combination with
Royal Caribbean, although the UK-listed company would be
smaller relative to the size of the US-listed company. In
addition, shareholders should note other differences between
the two proposals, relating mainly to certain circumstances
in which the DLC structure could be unwound without a
majority vote of the shareholders of the UK-listed company,
as detailed in Carnival's announcement. However, the Board
is satisfied that this could occur only in exceptional
circumstances and further has been assured by Carnival that
it is committed to maintaining the DLC structure.
Board Recommendation
To date the Board has been recommending the Royal Caribbean
DLC proposal. The Board believes that a DLC combination
with either Carnival or Royal Caribbean has the potential to
accelerate the creation of value for shareholders.
Having considered the terms of the two DLC proposals, the
Board has determined that a DLC combination with Carnival
would be financially superior for P&O Princess' shareholders
compared with the DLC combination with Royal Caribbean.
Since its previous announcement on 4 October 2002 P&O
Princess has negotiated the detailed agreements that would
implement Carnival's DLC proposal. The pre-conditions that
Carnival has attached to its DLC proposal are within the
control of P&O Princess and its shareholders. The other
limited circumstances in which Carnival can elect not to
proceed with its DLC proposal are situations that are likely
to benefit P&O Princess shareholders. Based on the
foregoing, the Board is satisfied that Carnival is committed
to the DLC offer.
Accordingly, the Board has withdrawn its recommendation of
the Royal Caribbean proposal and has so advised Royal
Caribbean.
Prior to the 10 January 2003 deadline, the Board will review
the Carnival DLC proposal and determine whether, in view of
the circumstances at the time, P&O Princess should accept,
and the Board should approve and recommend, Carnival's DLC
offer.
Termination agreement with Royal Caribbean
P&O Princess has today signed an agreement with Royal
Caribbean, the main points of which are as follows:
* the Southern European joint venture agreement will
terminate on 1 January 2003 as long as no change of control
of either P&O Princess or Royal Caribbean has occurred prior
to that date. Accordingly, the benchmark provisions are no
longer relevant;
* P&O Princess and Royal Caribbean have given each other
mutual releases from any liability relating to the joint
venture agreement, with these releases being effective
immediately. They will remain in effect unless a change of
control occurs or is approved by the Board or the
shareholders of P&O Princess before 1 January 2003;
* the implementation agreement relating to the DLC
Combination between P&O Princess and Royal Caribbean has
been terminated and both parties have given each other
mutual releases from any liability relating to that
agreement; and
* in light of the Board's withdrawal of its
recommendation of the Royal Caribbean DLC proposal, P&O
Princess has paid the $62.5 million break fee to Royal
Caribbean as contemplated by the implementation agreement.
A copy of the new agreement with Royal Caribbean will be
available on P&O Princess' website
(www.poprincesscruises.com) in due course.
Peter Ratcliffe, Chief Executive Officer of P&O Princess
said:
"Following our constructive negotiations over the past two
weeks, we are pleased that Carnival has put forward a
committed DLC offer that would allow all of our shareholders
to retain an ongoing interest in a combination of Carnival
and P&O Princess. This is important to us given the growth
potential of the cruise industry and the exciting prospects
for a combined Carnival and P&O Princess group.
"Our Board has determined that the DLC proposed by Carnival
would be financially superior to the DLC with Royal
Caribbean. With Carnival now committed to make their DLC
offer, the Board has decided to withdraw its recommendation
of the Royal Caribbean proposal.
"We are also pleased to have been able to put in place
arrangements for terminating our agreements with Royal
Caribbean on an amicable basis."
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) +1 212 333 3810
Steve Lipin
Lauren Teggelaar
Website www.poprincesscruises.com
Analyst conference call
We are holding a conference call for UK and European analysts
and investors at 09.30 BST and one for US analysts and
investors at 14.30 BST/09.30 EST. An archive recording of
this call will be available on our website at
www.poprincesscruises.com once the call has finished. Below
are details of the dial in numbers:
09.30 BST Dial in number: +44 20 7365 3732
Replay number +44 20 8797 2499 (pin 114467#)
14.30 BST/ Dial in number +44 20 7365 3732
09.30 EST 1 800 257 1927
Replay number +44 20 8797 2499 (pin 113786#)
1 800 405 2236 (pin 505404#)
P&O Princess
P&O Princess Cruises plc is a leading international cruise
company with some of the strongest cruising brand names:
Princess Cruises in North America; P&O Cruises, Swan
Hellenic and Ocean Village in the UK; AIDA and A'ROSA in
Germany; and P&O Cruises in Australia. It is a leading
provider of cruises to Alaska, the Caribbean, Europe, the
Panama Canal and other Exotic destinations. The current
complement of 19 ships and two river boats offering 31,130
berths is set to grow in the next two years with six new
ocean cruise ships and one river boat on order.
P&O Princess Cruises has approximately 20,000 employees
worldwide and carried over one million passengers in 2001,
generating a revenue of approximately $2.5 billion
(approximately GBP1.7 billion). Headquartered in London, P&O
Princess Cruises' ordinary shares are quoted on the London
Stock Exchange and as ADSs on the New York Stock Exchange
(under the symbol "POC").
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.
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.