Friday, February 4, 2000

Star/Carnival gain control of NCL
Earlier today, Arrasas Ltd took its stake in NCL Holding ASA, to around 66%. Arrasas is the vehicle created for Star Cruises' take-over of NCL and in which Carnival Corporation now has a 40% holding.

With control of NCL, Star/Carnival ousted its board and installed Statoil chairman Ole Lund as the new NCL chairman. Lund had earlier resigned as Chairman of the Oslo Stock Exchange when it was learned that he had been tapped by Star to head up NCL should its take-over succeed.

P&O to spin-off cruise operation
The Board of The Peninsular and Oriental Steam Navigation Company yesterday announced that it intends to demerge the group's cruises business to form a separate company. The ongoing group will continue to focus increasingly on its high return logistics businesses. A listing will be sought for the new cruise company in both London and New York. Its headquarters will be in London.

In a statement, P&O said that P&O Cruises and the group's U.S. business, Princess Cruises, are two of the best known brands in the industry. The profits of P&O's cruises business have been growing at 17% compound for the last 10 years and its return on capital and other financial measures are at the forefront of the industry. P&O Cruises is the U.K'.s foremost cruise company while Princess is the leading U.S. operator in Alaska, Europe and other key destination trades and has a powerful and expanding presence in the Caribbean.

With the inclusion of Aida Cruises, Germany's fastest growing cruise company, and the Group's cruise interests in Australasia, P&O claims to be the most international of all the cruise companies. In order to meet continuing strong demand and further increase cost effectiveness, P&O's cruises business has 11 ships on order which will double the size of the fleet over the next five years.

Peter Ratcliffe, currently President of Princess Cruises and a Main Board Director of P&O, will assume executive responsibility for P&O's cruises division and will become Chief Executive of the new company. Lord Sterling will become Chairman of the new company. Lord Sterling and Sir Bruce MacPhail will continue as Chairman and Managing Director respectively of P&O and Tim Harris will continue as Assistant Managing Director of P&O and Chief Executive of P&O Nedlloyd.

The decision to demerge cruises follows the Group's progress in focusing on its three core businesses ­ cruises, ferries and ports ­ particularly since its strategic announcement in March 1999. With the exception of cruises, these are now heavily concentrated on logistics and transport businesses where P&O has a strong position and can achieve high returns. In 1999 the ferries and ports divisions made excellent progress, with a return on capital approaching 15%. Ports, ferries and logistics will be the core businesses for P&O in future and the key areas for further investment.

P&O is one of the world's leading port operators with 21 container terminals in 15 countries and interests in a further 30 ports. The business is growing strongly on the back of increasing world trade. A number of P&O's port investments are in a start-up phase and their full potential has yet to be realised. There are many other locations for further profitable investment.
P&O Nedlloyd is an important customer of P&O Ports. P&O says it remains committed to securing a listing for P&O Nedlloyd and to playing a proactive part in the further consolidation that is taking place in container shipping. In so doing it will seek to maintain the benefits of the current relationship.
P&O is the UK's best known ferry operator with 50 ships carrying both freight and passengers and a strong market position. The UK-Continental freight market in particular has grown considerably, approximately 50% in the last five years. There will be further opportunities to expand the business both in the UK and overseas.

P&O also has a strong presence in high value added areas of supply chain management, with a leading position in the European business-to-business market and in cold product distribution in Australia and North and South America. The growth of outsourcing and e-commerce are opening up major new opportunities.

The P&O brand and reputation has been, and will continue to be, of immense value to these businesses. P&O is known throughout the world as a provider of a first class service in its chosen areas of logistics and transport. This enables the Group to leverage growth by offering vertically integrated solutions and cross-selling services. Maintaining these relationships will be of key importance in maximising the future growth potential of these businesses.
Commenting on the announcement, P&O Chairman Lord Sterling said: "Over the last few years our strategy has focused on increasing shareholder value through investing in rapidly growing businesses offering high returns and moving out of other areas. We have achieved our targets ahead of schedule. The demerger we are announcing today is the next logical step. It will enable both businesses to pursue the strategies that best meet their long term objectives and to accelerate their future growth. It is strongly in the interests of our stockholders, customers and employees."

The demerger will be subject to certain approvals and good progress is being made in securing these. It will then be put to stockholders. It is hoped to conclude the process in the fourth quarter of 2000. No further statement will be made until the Group's preliminary announcement of its 1999 results on 16 March.

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