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January 30 & 31, 2002

January 18, 2002

Carnival ups offer for Princess
Carnival Corporation yesterday sweetened its offer for P&O Princess Cruises to £3.5 billion ($5 billion). Carnival is seeking to thwart a proposed merger by Princess and Royal Caribbean that would knock it from its place as the world's largest cruise ship operator

The P&O Princess board responded that it would consider the revised offer in detail and respond in due course.

In a letter making the revised offer, Carnival chairman and CEO Mickey Arison says the offer is based on the assumption that P&O Princess can ensure that its joint venture with Royal Caribbean "can be terminated in 2003 without cost or liability, as you have indicated. We therefore continue to require clarity as to how this will be achieved in practice."

"We remain open to exploring with you the prospects of offering an alternative structure to your shareholders which retains all of the perceived benefits of the proposed DLC [dual listed company] structure with Royal Caribbean." says the Carnival letter.

"However, having taken legal advice," continues the letter, "we are concerned that the DLC structure which you have proposed to your shareholders is defective. In analyzing the DLC structure proposed by yourselves and Royal Caribbean, our tax advisers believe that there is a significant risk that the DLC structure will lose its Section 883 tax exemption for a significant portion of the combined companies' income, and that the amounts involved would be material."

"We firmly believe," concludes the letter, "that our revised offer is a superior proposal to the Royal Caribbean proposal. In the absence of your prompt confirmation that our offer is superior, we will be urging your shareholders to vote to adjourn the 14 February 2002 EGM or, failing such adjournment being achieved, to vote against the existing DLC proposal with Royal Caribbean."