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July 24,2002

EC clears Carnival bid for Princess
The European Commission has granted clearance under the European Union's Merger Regulation to the proposed acquisition of British cruise operator P&O Princess Plc by U.S.-based Carnival Corp.

"We are obviously very pleased with the conclusions reached by the European Commission," commented Micky Arison, Chairman and Chief Executive of Carnival. "The Commission undertook an in-depth review of the proposed transaction, hearing arguments from all parties. While the process was nerve-racking at times, the Commission's thorough analysis of the large amount of material and submissions resulted in the right outcome. This decision is consistent with the national competition authorities' views reached in Germany and the U.K. on the proposed P&O Princess/Royal Caribbean combination."

"We hope that in light of our clearance in Europe, P&O Princess will now meet with us as soon as possible. We clearly have the superior financial proposal and today's news confirms what we have indicated all along: that both transactions are similarly situated and equally deliverable from a regulatory perspective."

Both combinations also remain under review by the Federal Trade Commission in the U.S. A decision is expected for both transactions on a similar timetable, which Carnival believes will not be before mid-September.

In a statement on its decision, the Commission says it was initially concerned about the parties' strong position in the cruise market in the U.K .and in Germany. But after an in-depth analysis it concluded that the strong growth enjoyed in the market, the absence of substantial barriers to entry and the ability for rivals in the market to shift capacity, for example from the U.S. to the U.K,, would exert a sufficient competitive pressure on Carnival.

On December 16, 2001, Carnival announced a unilateral pre-conditional offer to acquire all the shares of P&O Princess, a UK-based worldwide cruise company which operates the brands Princess Cruises, P&O Cruises, Swan Hellenic, Aida Cruises, Seetours, and A'Rosa. Carnival is also a cruise company active worldwide. Its brands include Carnival Cruise Lines, Holland America Line, Costa Cruises, Cunard Line, Seabourn Cruise Lines and Windstar Cruises.

The takeover bid was notified to the Commission for regulatory clearance in February 2002. The U.K. competition authorities had requested referral of the case pursuant to Article 9 of the Merger Regulation citing their own concerns about the deal's impact in the United Kingdom's cruise market. However, the Commission decided to continue with the review as the deal originally raised concerns also in other Member States, particularly in Germany.

Together, Carnival and P&O Princess accounted for around a third of cruise passengers in 2000 in the European Economic Area the 15 EU states plus Norway, Iceland and Liechtenstein with the main overlap being felt in the UK and Germany. Market shares are also high in Italy and Spain, but in this case the addition of P&O's cruise operations is minimal.

In the course of its investigation of the Carnival bid, the Commission had fruitful contacts with the UK's Competition Commission, which was assessing and has now cleared a rival bid by Royal Caribbean, as well as with the Federal Trade Commission of the United States, which is still examining both bids for P&O Princess.

The Commission's in-depth investigation of the Carnival bid has, in the meantime, revealed that the initial concerns were unjustified.

Although by acquiring P&O Princess, the U.K.'s largest player, Carnival would have around a third of the U.K. cruise market in terms of passengers, barriers to entry are not significant as illustrated by the rapid and successful arrival of tour operators in the last five years who now carry around one third of all UK cruise passengers. Existing operators have also experienced significant growth.

Moreover, Carnival's position in the UK market is expected to come under pressure from international competitors capable of modifying the proportion of British customers on their ships, for example by increasing the proportion of British passengers on cruises organised primarily for the U.S. market, which have a significant presence in U.K.

The Commission has found that, while cruises carrying mainly U.K. passengers are preferred by a section of U.K .customers, a bigger proportion is not sensitive to this distinction. Moreover, ships can be and indeed are reallocated on an ongoing basis between different geographic markets, from the U.S. to the U.K. for example.

As regards the German market, the acquisition would give Carnival a 25% market share in terms of passenger cruise days. But Mediterranean companies, such as MSC and Festival, have successfully entered the market in last five to ten years.

It was also concluded that the merger would not have any significant impact on the cruise markets in Spain, Italy, France or other European countries, all countries which so far have had a lesser cruise tradition than the UK and Germany, but which present a significant potential for growth and market entry.

Finally, it was concluded that the high recent and projected growth rate in cruise markets would, in itself, constitute a significant competitive constraint on the incumbent cruise operators as high growth rates provide an incentive for new operators to enter the market.

Moreover, the additional cruise ship capacity which will come on-stream for Carnival and P&O in the next two or three years may lead to some increase in the parties' market shares but it will also constrain their ability to raise prices as they will need to continue to persuade a sufficient number of holidaymakers to take up cruising to ensure high utilisation rates of this new capacity.

"We are obviously very pleased with the conclusions reached by the European Commission," commented Micky Arison, Chairman and Chief Executive of Carnival. "The Commission undertook an in-depth review of the proposed transaction, hearing arguments from all parties. While the process was nerve-racking at times, the Commission's thorough analysis of the large amount of material and submissions resulted in the right outcome. This decision is consistent with the national competition authorities' views reached in Germany and the U.K. on the proposed P&O Princess/Royal Caribbean combination."

"We hope that in light of our clearance in Europe, P&O Princess will now meet with us as soon as possible. We clearly have the superior financial proposal and today's news confirms what we have indicated all along: that both transactions are similarly situated and equally deliverable from a regulatory perspective."

Both combinations also remain under review by the Federal Trade Commission in the U.S. A decision is expected for both transactions on a similar timetable, which Carnival believes will not be before mid-September.

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