Princess, Royal Caribbean cruise lines merge in $3 billion deal
By Ken Thomas
Associated Press
MIAMI — P&O Princess Cruises PLC of London plans to merge with Royal Caribbean Ltd. in a $3 billion deal, leapfrogging Carnival Corp. as the world's largest cruise ship operator.
Princess said yesterday the combined company, tentatively named RCP Cruise Lines, would have 75,000 berths on 41 ships, topping Miami-based Carnival, which has 60,000 berths on 43 ships.
The British company will own 50.7 percent of the new group, with Royal Caribbean taking 49.3 percent. The combined company would be worth about $6 billion and maintain headquarters in Miami.
Analysts lauded the deal.
"I think investors will become more comfortable that the combined entities have significantly more staying power than either of the predecessor companies," said Scott Barry, a leisure travel industry analyst for CS First Boston in New York.
Bob Simonson, an analyst with Chicago-based William Blair & Co., agreed, saying the companies would complement each other — Royal Caribbean is heavily oriented toward Caribbean travel while Princess offers routes in Europe, Australia and Alaska.
"It's a pretty good fit," Simonson said.
The deal comes at a difficult time for the cruise industry, which was already slumping before the Sept. 11 attacks made it lose millions of dollars more. Fears about traveling have kept many passengers home, and boosting security has been costly.
American Classic Voyages, the operator of Hawai'i's two inter-island cruise ships, declared bankruptcy on Oct. 19 and laid off 1,100 workers.
Princess and Royal Caribbean ships stop in Hawai'i once or twice a year on their way to other destinations.
The companies said the merger should save $100 million within a year even as the new company plans to increase its capacity by more than a third to 105,000 berths by 2005. It has 14 ships on order.
Princess chief executive Peter Ratcliffe said no significant job cuts were expected. The merged company will have 40,000 employees.
Princess said savings would come from marketing efficiencies, improved purchasing and combined tour operations in Alaska.
Under terms of the deal, an existing Royal Caribbean share will be equivalent to up to 3.46 existing P&O Princess shares. The merger, subject to shareholder and regulatory approval, is to be completed in the second quarter of 2002.
Princess said 3 million passengers were carried by the two companies in 2000, and aggregate sales for the nine months to Sept. 30, 2001 were more than $5 billion.
Fain said the two groups had been discussing a possible alliance as long ago as 1991 but that the events of Sept. 11 made the move "even more valuable."
Princess split away from Peninsular and Oriental Steam Navigation Company in Oct. 2000 to become an independent company.
P&O traces its origins to the 1840s in Britain. In 1999, it acquired a majority stake in the German cruise line AIDA, and acquired full control of AIDA and Seetours the following year.
Royal Caribbean Cruise Line was founded in 1969 by three Norwegian shipping lines. It merged with Admiral Cruises in 1988 and changed its name to Royal Caribbean International in 1997.
