Princess unites with Royal Caribbean in $6 billion deal

Posted: Tuesday, November 20, 2001

LONDON -- P&O Princess Cruises PLC is merging with Miami-based Royal Caribbean Ltd. in a deal worth about $6 billion that creates the world's largest cruise ship company in an industry hurt by the Sept. 11 terrorist attacks.

London-based Princess said today the combined 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 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.

A spokeswoman for Royal Caribbean said it's too soon to know whether the merger will affect ship operations in Alaska.

The merger "gives us increased flexibility to deploy our ships and respond to changes in the marketplace," said Lynn Martenstein of Royal Caribbean. But "it really is premature to comment on specific operations in any given port."

Celebrity Cruises, which is owned by Royal Caribbean, will follow through with an earlier announcement to divert one ship from Europe to Alaska, swelling its fleet here to three vessels, Martenstein said.

A prepared statement by Princess Cruises did not say in detail what effect the merger would have on Alaska operations, but noted the combined group will have a strong position here and will benefit from a substantial tour operation infrastructure in Alaska, including five wilderness lodges.

Princess announced last month it would transfer a ship from Europe to Alaska next summer, increasing the cruise line's number of Juneau stops from 92 to 103. Spokeswoman Denise Seomin said she had no reason to believe the merger would affect the transfer.

Under terms of the deal, Princess Cruises, which includes the Princess Tours division in Seattle, 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 has 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.

*****

Empire reporter Kathy Dye contributed to this article.



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