Cruising To A Merger

P&O Princess Cruises PLC and Miami-based Royal Caribbean Ltd. said Tuesday they will merge, creating the world's largest cruise ship company in an industry hurt by the Sept. 11 terrorist attacks.

London-based Princess said the "merger of equals" is worth $6 billion. The resulting company would have 41 ships and 75,000 berths, topping Miami-based Carnival Cruise Lines.

The move 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.

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 British company will own 50.7 percent of the new group, with Royal Caribbean taking 49.3 percent. The company's headquarters will be in Miami.

Princess said savings would come from marketing efficiencies, improved purchasing and combined tour operations in Alaska.

The merger, subject to shareholder and regulatory approval, is to be completed in the second quarter of 2002.

Richard D. Fain, chairman and chief executive officer of Royal Caribbean, will take the same post with the new group. Ratcliffe will become managing director and chief operating officer.

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."

Ratcliffe said the industry had suffered since Sept. 11, but he said it had "long-term growth characteristics."

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

A name had not been chosen for the merged company, which will have 40,000 employees.

Princess shares were up 19 percent in early trading on the London Stock Exchange to $5.39.

The move comes 13 months after Princess split away from Peninsular and Oriental Steam Navigation Company 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.

By Ed Johnson
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