News from the world of cruising ~
February 7, 2002
Carnival Corporation:
Increased Pre-Conditional Offer to be Made for P&O Princess Cruises PLC ('P&O Princess')
Carnival has the attention of at least 20% of Princess Shareholders
LONDON, Feb 7 - The following was released today by Carnival Corporation:
SUMMARY
- The Voting Pre-condition has been satisfied and therefore Carnival confirms its Increased Offer
- P&O Princess Shareholders controlling more than 20 per cent of P&O Princess shares have confirmed that they intend to vote to adjourn the EGM convened for 14 February 2002
- The Increased Offer of 0.3004 Carnival Shares per P&O Princess Share values each P&O Princess Share at 550 pence and values P&O Princess at approximately 3.8 billion pounds sterling
- Increased Offer pre-conditional only on regulatory clearance
- Intention to provide a Partial Cash Alternative of 250 pence per P&O Princess Share
- 53.8 per cent premium to the current "look through" value of P&O Princess under the "nil premium" Royal Caribbean Proposal
- 73.5 per cent premium to the price per P&O Princess Share prior to the announcement of the Royal Caribbean Proposal
- Carnival remains prepared to discuss with P&O Princess alternative structures for a combination of the two companies, including a DLC
Micky Arison, the Chairman and Chief Executive of Carnival, said: "We appreciate the strong support P&O Princess shareholders have already shown for an adjournment. These P&O Princess shareholders have today demonstrated their wish to have the opportunity to consider both proposals once the regulatory reviews are completed. We look forward to additional shareholders joining them in the coming days. We encourage the P&O Princess board to reconsider its position in light of the support shown for an adjournment. We urge P&O Princess shareholders to vote to adjourn the meeting, or, in the event that it is not adjourned, to vote against the Royal Caribbean proposal. Our increased offer shows our continued and genuine commitment to acquire P&O Princess."
Increased Offer
* Earlier today, Carnival announced the terms of its Increased Offer, subject to the satisfaction of the Voting Pre-condition, to acquire the whole of the issued and to be issued share capital of P&O Princess. The Increased Offer maintains essentially the same structure as the Revised Offer and offers P&O Princess Shareholders even more value.
* The Increased Offer was pre-conditional on Carnival having announced by no later than 1.00 p.m. (GMT) on Friday 8 February 2002 that it had received certain indications from shareholders holding or persons controlling in aggregate at least 103,894,849 P&O Princess Shares, representing at least 15 per cent. of the issued ordinary share capital of P&O Princess, that they intend to vote, or procure that such shares are voted, in favor of a resolution to adjourn the P&O Princess EGM, and request that such meeting be reconvened to a date no earlier than the date on which the US, EU and UK regulatory reviews for both the Royal Caribbean Proposal and Carnival's Increased Offer are completed, as appropriate, but in any event no later than 15 November 2002, as set out in the Voting Pre-condition.
* Carnival can now announce that P&O Princess Shareholders controlling more than 20 per cent of P&O Princess issued ordinary share capital have confirmed that they intend to vote to adjourn the EGM and request that such meeting be reconvened to a date no earlier than the date on which the regulatory reviews of both transactions are completed, but in any event no later than 15 November 2002. The written indications received were substantially in the form set out in Appendix IV. These indications are not legally binding and apply only at the date at which they are given. P&O Princess Shareholders who have given such indications are not restricted from dealing and therefore the number of shares they have given indications for may change in the future. The Voting Pre-condition is therefore now satisfied. The Increased Offer is now pre-conditional only on regulatory clearance.
* The Panel has required that Carnival will not increase its Increased Offer before the commencement of the EGM on 14 February 2002, unless the terms of the Royal Caribbean Proposal are amended.
* The Increased Offer comprises 0.3004 Carnival Shares for each P&O Princess Share. Based on the New York Stock Exchange closing price of a Carnival Share of $25.86 on 6 February 2002, the last business day prior to the date of this announcement, and an exchange rate of $1:0.708 pounds sterling, the Increased Offer values each P&O Princess Share at 550 pence and the issued share capital of P&O Princess at approximately 3.8 billion pounds sterling.
* Upon making the formal Increased Offer, Carnival will make available a Partial Cash Alternative of 250 pence for each P&O Princess Share, pre- conditional on financing being arranged on terms satisfactory to Carnival by no later than the date of posting of the Offer Document as set out in Appendix II.
* The Increased Offer gives P&O Princess Shareholders an upfront premium price that values their company at 13.4 times LTM EV/EBITDA and 18.8 times P/E, respectively. These are materially in excess of Carnival's equivalent multiples of 11.5 times LTM EV/EBITDA and 16.4 times P/E, respectively, which are already the highest in the sector. This is a fair and full price, paying now for the future benefits of the combination.
* Carnival's Increased Offer provides P&O Princess Shareholders with the security of a management team that has a track record of delivering superior margins and a premium market rating. Indeed, the P&O Princess Board recognizes that Carnival is the world's leading cruise operator.
* Carnival reaffirms that it is prepared to discuss alternative transaction structures with P&O Princess including, inter alia, a DLC or similar structure. Carnival has been advised however, that the DLC structure under the Royal Caribbean Proposal could be defective and, unless remedied, could result in a material US federal income tax liability. Carnival is not able to offer an alternative structure equivalent to the Royal Caribbean Proposal on a unilateral basis, but is prepared to work with P&O Princess in order to implement a tax efficient structure. Carnival envisages that the economic interest of P&O Princess under a DLC structure with Carnival would reflect the valuation of P&O Princess as set out in the Increased Offer. Action at the EGM
* In its announcement of 4 February 2002, the P&O Princess Board acknowledged that both the Royal Caribbean Proposal and Carnival's proposal are subject to "a lengthy assessment of all the competition issues." Neither the Royal Caribbean Proposal nor Carnival's Increased Offer can complete until the appropriate clearances have been received and Carnival has repeatedly stated that it has been advised that the reviews of both proposals are being conducted on the same overall timetable.
* Carnival does not see how the P&O Princess Board can believe it is in the best interests of its shareholders to take an unnecessarily premature decision. Carnival strongly believes that P&O Princess Shareholders should only have to decide between the Royal Caribbean Proposal and Carnival's Increased Offer after the outcome of the regulatory reviews of both proposals is known.
* By voting for the Royal Caribbean Proposal, P&O Princess Shareholders will lose the superior value provided by Carnival's Increased Offer. P&O Princess Shareholders should note that, on a "look through" basis, under the Royal Caribbean Proposal, P&O Princess Shares are valued at 358 pence per share.
* By voting to adjourn the EGM, P&O Princess Shareholders retain the option to decide between the Royal Caribbean Proposal and Carnival's Increased Offer, on their strategic and economic merits, once the regulatory outcome of both proposals is known. The P&O Princess Board has also now confirmed its view that "the proposal and approval by [P&O Princess] Shareholders of a resolution to adjourn the EGM should not give Royal Caribbean the right to terminate the Implementation Agreement."
* Carnival believes that the Increased Offer is more attractive to P&O Princess Shareholders and much more valuable than the Royal Caribbean Proposal. Carnival therefore strongly urges P&O Princess Shareholders to vote to adjourn the EGM until after the results of the regulatory reviews are known, or, in the event that the EGM is not adjourned, to vote against the Royal Caribbean Proposal. Intentions to vote for an adjournment of the EGM
* Shareholders controlling more than 20 per cent. of the issued ordinary share capital of P&O Princess, have confirmed to Carnival that they intend to vote in favor of a resolution to adjourn the P&O Princess EGM. The P&O Princess Shareholders who have made these statements of intent may include shareholders who have publicly indicated their support for an adjournment and / or their likely voting intentions for the EGM.
* These indications are not legally binding and apply only at the date at which they are given. P&O Princess Shareholders who have given such indications are not restricted from dealing and therefore the number of shares they have given indications for may change in the future.
The directors of Carnival accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Carnival (who have taken all reasonable care to ensure such is the case), the information contained herein for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information except that the only responsibility accepted by them for the information in this announcement relating to P&O Princess and Royal Caribbean which has been compiled from published sources is to ensure that the information has been correctly and fairly reproduced and presented.
CARNIVAL CORPORATION ("CARNIVAL") INCREASED PRE-CONDITIONAL OFFER TO BE MADE BY MERRILL LYNCH AND UBS WARBURG FOR P&O PRINCESS CRUISES PLC ("P&O PRINCESS")
7 February 2002
1. Introduction
The board of Carnival today announces the terms of an Increased Offer to acquire the whole of the issued and to be issued share capital of P&O Princess.
2. The Increased Offer
The Increased Offer will be made on the following basis:
0.3004 Carnival Shares for each P&O Princess Share and so in proportion for any other number of P&O Princess Shares held. Upon making the formal Increased Offer, Carnival will make available a Partial Cash Alternative of 250 pence for each P&O Princess Share, pre- conditional on financing being arranged on terms satisfactory to Carnival by no later than the date of posting the Offer Document as set out in Appendix II. A P&O Princess Shareholder electing to receive the Partial Cash Alternative will also receive such number of Carnival Shares so that the total value of the consideration for each P&O Princess Share, on the date the terms of the Partial Cash Alternative are fixed, equals the value of 0.3004 Carnival Shares.
The terms of the Partial Cash Alternative may be fixed at the time the formal Increased Offer is made or such earlier date as Carnival may determine as described in paragraph 11 below. There will also be an Additional Cash Election enabling P&O Princess Shareholders to elect for extra cash to the extent that the Partial Cash Alternative is not taken up in full by P&O Princess Shareholders. Accordingly, P&O Princess Shareholders who accept the Increased Offer will be able to elect to receive a combination of shares and cash. This structure allows P&O Princess Shareholders to benefit fully from any upturn in the sector, whilst retaining the option to receive the certainty of a cash element when the formal offer is made.
To satisfy the Partial Cash Alternative, Carnival requires cash of approximately $2.4 billion. Carnival currently has cash and existing undrawn debt facilities of over $2.4 billion. Based on the New York Stock Exchange closing price of a Carnival Share of $25.86 on 6 February 2002, the last business day prior to the date of this announcement, and an exchange rate of $1:0.708 pounds sterling, the Increased Offer values each P&O Princess Share at 550 pence and the entire existing share capital of P&O Princess at approximately 3.8 billion pounds sterling.
The Increased Offer represents:
* a premium of 73.5 per cent to the closing middle market price of 317 pence per P&O Princess Share on 19 November 2001, the last business day prior to the announcement of the Royal Caribbean Proposal;
* a premium of 36.5 per cent to the closing middle market price of 403 pence per P&O Princess Share on 6 February 2002, the last business day prior to the date of this announcement; and
* a premium of 53.8 per cent to the current "look through" value of P&O Princess under the Royal Caribbean Proposal of 358 pence per P&O Princess Share on 6 February 2002, the last business day prior to the date of this announcement.
The making of the Increased Offer is subject only to the Pre-condition set out in Appendix I, which relates only to regulatory clearance being received. Carnival is entitled to waive this Pre-condition. If this Pre-condition is satisfied, Carnival will be obliged to post the Offer Document as explained in paragraph 9.
The Increased Offer was pre-conditional on Carnival having announced by no later than 1.00 p.m. (GMT) on Friday 8 February 2002 that it had received certain indications from shareholders holding or persons controlling in aggregate at least 103,894,849 P&O Princess Shares, representing at least 15 per cent of the issued ordinary share capital of P&O Princess, that they intend to vote, or procure that such shares are voted, in favor of a resolution to adjourn the P&O Princess EGM, and request that such meeting be reconvened to a date no earlier than the date on which the US, EU and UK regulatory reviews for both the Royal Caribbean Proposal and Carnival's Increased Offer are completed, as appropriate, but in any event no later than 15 November 2002, as set out in the Voting Pre-condition.
Carnival can now announce that P&O Princess Shareholders controlling more than 20 per cent. of P&O Princess issued ordinary share capital have confirmed that they intend to vote to adjourn the EGM and request that such meeting be reconvened to a date no earlier than the date on which the regulatory reviews of both transactions are completed, but in any event no later than 15 November 2002. The written indications received were substantially in the form set out in Appendix IV. These indications are not legally binding and apply only at the date at which they are given. P&O Princess Shareholders who have given such indications are not restricted from dealing and therefore the number of shares they have given indications for may change in the future. The Voting Pre-condition is therefore now satisfied. The Increased Offer is now pre- conditional only on regulatory clearance.
The Panel has required that Carnival will not increase its Increased Offer before the commencement of the EGM on 14 February 2002, unless the terms of the Royal Caribbean Proposal are amended.
The Increased Offer remains structured to avoid triggering the Joint Venture change of control "poison pills." The P&O Princess Board has stated that it is entitled to exit the Joint Venture through the commercial benchmark mechanism in January 2003. With the consent of the Panel, Carnival will be permitted to delay posting its Offer Document until such date that Carnival estimates will ensure that the last date on which the Increased Offer can become both unconditional as to acceptances and wholly unconditional will be as soon as possible after the satisfaction of Condition 7 (the termination of the Joint Venture Agreement). Carnival currently estimates that it will post its Offer Document in early December 2002. If the exit through the commercial benchmark mechanism is delayed, the last date for declaring the Increased Offer unconditional will only be extended with the consent of the Panel. SEC rules on the right to withdraw acceptances of an offer have the effect that, in accordance with normal Panel practice, the Increased Offer must become wholly unconditional at the same time as it becomes unconditional as to acceptances, otherwise it will lapse. Notwithstanding the level of acceptances received, Condition 1 (relating to acceptances) is subject to the satisfaction of Condition 7.
The making of the Partial Cash Alternative is pre-conditional on financing being arranged by no later than the posting of the Offer Document as set out in Appendix II. The Conditions of the Increased Offer are set out in Appendix III. P&O Princess Shares will be acquired by Carnival fully paid, or credited as fully paid, and free from all liens, charges, equitable interests, encumbrances and other interests and together with all rights attaching thereto on or after the date of this announcement, including the right to receive and retain all distributions declared, made or paid after the date of this announcement subject to the exception described below.
P&O Princess Shareholders will be entitled to retain all P&O Princess dividends paid or payable in respect of the period from the date of this announcement until the Increased Offer becomes wholly unconditional. If, after this announcement, any dividends in excess of 3 cents in each quarter per P&O Princess Share are paid or become payable Carnival shall have the right, as an alternative to lapsing the Increased Offer for non-fulfillment of the Conditions, to reduce the consideration for each P&O Princess Share under the Increased Offer by an amount equal to the excess. The Increased Offer will extend to all existing issued P&O Princess Shares and to any P&O Princess Shares which are unconditionally allotted or issued prior to the date on which the Increased Offer closes (or such earlier date as Carnival may, subject to the City Code, decide) including P&O Princess Shares issued pursuant to the exercise of options under the P&O Princess Employee Share Incentive Plans or otherwise. In conjunction with the Increased Offer for the P&O Princess Shares, subject to obtaining exemptive relief from the SEC, an offer will be made to holders of P&O Princess ADRs to tender the ADSs underlying such P&O Princess ADRs.
Under New York Stock Exchange rules, the issue of the New Carnival Shares requires Carnival shareholder approval. Such approval is a Condition of the Increased Offer. Approval by shareholders with a majority of voting rights in Carnival is required for the resolution to be passed. The Arison family and certain related trusts have given proxies to vote shares representing 47 per cent. of the voting rights in Carnival in favor of the resolution. Carnival intends to offer to acquire the P&O Princess Preference Shares and the P&O Princess Subscriber Shares for cash for the amounts paid up on those shares, conditional on the Increased Offer becoming wholly unconditional.
Application will be made for the New Carnival Shares to be admitted to listing on the New York Stock Exchange. Should Carnival perceive there to be sufficient demand for such a facility, Carnival intends to seek a listing of the existing Carnival Shares and the New Carnival Shares on the London Stock Exchange. Carnival will confirm whether it will seek such listing at the time of posting the Offer Document.
The New Carnival Shares will rank pari passu with the Carnival Shares in issue at the date the Increased Offer becomes wholly unconditional, save that they shall rank for dividends with effect from and including the first complete financial quarter of Carnival following such date. Further details on settlement, listing and dealings will be included in the Offer Document and Form of Acceptance which will be sent to the P&O Princess Shareholders in the period following the satisfaction of the regulatory Pre-condition as described in this paragraph 2 and in paragraph 9 below.
Carnival reaffirms that it is prepared to discuss alternative transaction structures with P&O Princess including, inter alia, a DLC or similar structure. Carnival has been advised however, that the DLC structure under the Royal Caribbean Proposal could be defective and, unless remedied, could result in a material US federal income tax liability. Carnival is not able to offer an alternative structure equivalent to the Royal Caribbean Proposal on a unilateral basis, but is prepared to work with P&O Princess in order to implement a tax efficient structure. Carnival envisages that the economic interest of P&O Princess under a DLC structure with Carnival would reflect the valuation of P&O Princess as set out in the Increased Offer.
3. Value
The Increased Offer gives P&O Princess Shareholders an upfront premium price that values their company at 13.4 times LTM EV/EBITDA and 18.8 times P/E, respectively. These are materially in excess of Carnival's multiples of 11.5 times LTM EV/EBITDA and 16.4 times P/E, respectively, which are already the highest in the sector.
Carnival's Increased Offer provides P&O Princess Shareholders with the security of a management team that has a track record of delivering superior margins and a premium market rating. Indeed, the P&O Princess Board recognizes that Carnival is "the world's leading cruise operator." Carnival's Increased Offer is at a fair and full price, which includes a control premium, paying now for the future benefits of the combination. In contrast, under the "nil-premium" Royal Caribbean Proposal P&O Princess Shareholders will cede operational control to Royal Caribbean's existing management and hand over effective control on various material issues, and significant influence on others, to a number of Royal Caribbean's existing major shareholders.
4. Deliverability
Carnival continues to believe, and has been so advised, that there is no material difference in the regulatory analysis between the two proposals and, therefore, strongly believes that its Increased Offer is as deliverable as the Royal Caribbean Proposal. Carnival has publicly provided its and its advisors' analysis of the antitrust issues involved in its proposal, but neither P&O Princess nor Royal Caribbean has laid out their analysis and neither has provided any basis as to why they believe the two proposals pose substantially different antitrust risks. Carnival has repeatedly offered to discuss the antitrust issues with P&O Princess and its advisors, but this offer has been consistently rebuffed.
Despite P&O Princess' claims that the Royal Caribbean Proposal is more deliverable than the Carnival proposal, the Royal Caribbean Proposal has been referred to the Competition Commission for review, the outcome of which will not be due until late May. Indeed, P&O Princess has now acknowledged that the regulatory agencies will undertake a "lengthy assessment" of the antitrust issues involved in both proposals.
Carnival has provided substantive information as to what the relevant antitrust considerations are in both the EU and the US. All parties have publicly stated that the appropriate market in which to evaluate the competitive effects of both transactions is the wider vacation market. There is no doubt that cruise companies undertake substantial efforts to attract consumers from other vacation options.
Even if the regulators were to take a more narrowly defined view of the market, both Carnival and Royal Caribbean are similarly situated. Although P&O Princess has claimed that Carnival's larger size, based on profitability and market valuation, makes Carnival's proposal more risky, Carnival has been advised that such factors are not relevant to the antitrust analysis. Indeed, to the extent such factors indicate that Carnival is a more efficient operator, this would be viewed favorably by the antitrust regulators.
Carnival has already spent significant time and resources with the regulators in the US and Europe and is fully committed to pursuing these regulatory reviews to their ultimate conclusions.
5. Action at the EGM
In their announcement of 4 February 2002, the P&O Princess Board acknowledged that both the Royal Caribbean Proposal and Carnival's proposal are subject to "a lengthy assessment of all the competition issues". Neither the Royal Caribbean Proposal nor Carnival's Increased Offer can complete until the appropriate clearances have been received and Carnival has repeatedly stated that it has been advised that the reviews of both proposals are being conducted on the same overall timetable.
Carnival does not see how the P&O Princess Board can believe it is in the best interests of its shareholders to take an unnecessarily premature decision. Carnival strongly believes that P&O Princess Shareholders should only have to decide between the Royal Caribbean Proposal and Carnival's Increased Offer after the outcome of the regulatory reviews of both proposals is known.
By voting for the Royal Caribbean Proposal, P&O Princess Shareholders will lose the superior value provided by Carnival's Increased Offer. P&O Princess Shareholders should note that, on a "look through" basis, under the Royal Caribbean Proposal, P&O Princess Shares are valued at 358 pence per share. By voting to adjourn the EGM, P&O Princess Shareholders retain the option to decide between the Royal Caribbean Proposal and Carnival's Increased Offer, on their strategic and economic merits, once the regulatory outcome of both proposals is known. The P&O Princess Board has also now confirmed its view that "the proposal and approval by [P&O Princess] Shareholders of a resolution to adjourn the EGM should not give Royal Caribbean the right to terminate the Implementation Agreement."
6. Intentions to vote for an adjournment of the EGM
Shareholders controlling more than 20 per cent. of the issued ordinary share capital of P&O Princess have confirmed to Carnival that they intend to vote, or procure that such shares are voted, in favor of a resolution to adjourn the P&O Princess EGM, and request that such meeting be reconvened to a date no earlier than the date on which the US, EU and UK regulatory reviews for both the Royal Caribbean Proposal and Carnival's Increased Offer are completed, as appropriate, but in any event no later than 15 November 2002, as set out in the Voting Pre-condition. The P&O Princess Shareholders who have made these statements of intent may include shareholders who have publicly indicated their support for an adjournment and / or their likely voting intentions for the EGM.
These indications are not legally binding and apply only at the date at which they are given. P&O Princess Shareholders who have given such indications are not restricted from dealing and therefore the number of shares they have given indications for may change in the future.
7. Background to the announcement of the Increased Offer
Carnival announced its Revised Offer on 30 January 2002, which was sent direct to P&O Princess Shareholders. On 4 February 2002, the P&O Princess Board announced its rejection of Carnival's Revised Offer. The P&O Princess Board did, however, belatedly clarify its ability to terminate the Joint Venture Agreement under the benchmark mechanism consistent with the structure of Carnival's Revised Offer.
The P&O Princess Board has also now confirmed its view that an adjournment of the EGM approved by P&O Princess Shareholders should not give Royal Caribbean the unilateral right to terminate their agreement and walk away from the Royal Caribbean Proposal.
In its written proposal to the P&O Princess Board on 13 December 2001, and ever since, Carnival has indicated its willingness to consider a DLC structure in order to maintain a London Stock Exchange listing and FTSE index inclusion of P&O Princess. Such a structure would address any limited flowback issues, but Carnival cannot provide this on a unilateral basis, particularly given its concerns over potential adverse tax consequences. The P&O Princess Board's continued unwillingness to meet with Carnival has deprived P&O Princess Shareholders of this alternative thus far.
8. Benefits of the proposed combination of Carnival and P&O Princess
A combination of Carnival and P&O Princess creates a global vacation and leisure company with a broader, more diverse and more complementary portfolio of brands, creating a wider range of vacation choices for its customers.
Operating in the US, Europe and Australia, the combined group will have an enhanced ability to attract customers away from land-based vacations to cruise vacations.
The Enlarged Carnival Group will benefit from the financial flexibility of the combined group's strong balance sheet and cash flow. Carnival believes that the terms of the Increased Offer will ensure that the proposed combination of Carnival and P&O Princess will retain a strong financial position with an investment grade credit rating.
Carnival strongly believes that it can deliver greater value to P&O Princess Shareholders through its Increased Offer than can be delivered through the Royal Caribbean Proposal, because Carnival has:
- proven operating practices and a better management track record, resulting in higher shareholder returns;
- a more effective brand strategy;
- a proven record of delivering greater profitability and superior performance; and
- a significantly stronger balance sheet.
9. Timetable
Due to the timing of the regulatory process, this Increased Offer remains structured as a pre-conditional offer in order to comply with the Code. The fact that the Increased Offer is structured as a pre-conditional offer does not reduce the level of commitment with which Carnival is obliged to pursue it. If the regulatory Pre-condition is satisfied, Carnival will be obliged to post the Offer Document as explained herein. The P&O Princess Board has stated that it is entitled to exit the Joint Venture through the commercial benchmark mechanism on or after 1 January 2003. Carnival has therefore undertaken to the Panel that, subject to the satisfaction of the regulatory Pre-condition, it will post the Offer Document at such time that the Joint Venture Agreement can terminate through the January commercial benchmark mechanism within the normal 60 day Code timetable. In certain circumstances, this timetable may be extended, as described in paragraph 2 above, with the consent of the Panel.
Set out below is an indicative timetable to completion:
14 February 2002: P&O Princess EGM. P&O Princess Shareholders vote to adjourn, or, in the event that the EGM is not adjourned, vote against the Royal Caribbean Proposal
Q2/Q3 2002: Regulatory process complete for both Carnival's Increased Offer and the Royal Caribbean Proposal. Regulatory Pre-condition to Increased Offer satisfied
Q2/Q3 2002: Reconvened EGM, if applicable
December 2002: Posting of Offer Document including Partial Cash Alternative
January 2003/April 2003: The Joint Venture Agreement terminates through the benchmark mechanism. Increased Offer wholly unconditional. Shareholders receive consideration
10. Management and employees
The combination of Carnival and P&O Princess will offer P&O Princess' employees exciting career prospects for the future. P&O Princess' management and employees will benefit under the Increased Offer from a larger operating platform and a business of greater international size and scope. Carnival operates its various cruise businesses as separate decentralized units and envisages extending this approach to the businesses of P&O Princess. Carnival confirms that the existing employment rights, including pension rights, of employees of P&O Princess will be fully safeguarded. Carnival does not anticipate that there will be significant redundancies arising from its combination with P&O Princess.
11. Partial Cash Alternative
Upon making the formal Increased Offer, Carnival will make available a Partial Cash Alternative of 250 pence for each P&O Princess Share. The Partial Cash Alternative is pre-conditional on financing being arranged on terms satisfactory to Carnival by no later than the date of posting of the Offer Document, as set out in Appendix II. There will also be an Additional Cash Election enabling P&O Princess Shareholders to elect for extra cash to the extent that the Partial Cash Alternative is not taken up in full by P&O Princess Shareholders.
P&O Princess Shareholders electing to receive cash will also receive such number of Carnival Shares so that the total value of the consideration, on the date the terms of the Partial Cash Alternative are fixed, equals the value of 0.3004 Carnival Shares. The terms of the Partial Cash Alternative may be fixed at the time the formal Increased Offer is made or such earlier date as Carnival may determine. The value of 0.3004 Carnival Shares will be calculated by reference to the average closing price of a Carnival Share on the New York Stock Exchange over the 10 business days prior to the date on which the terms of the Partial Cash Alternative are fixed, translated into pounds sterling at the average US dollar/pounds sterling exchange rate over this period. The difference between this value and such P&O Princess Shareholder's cash entitlement for each P&O Princess Share will be divided by the average closing price of a Carnival Share referred to above to give the number of New Carnival Shares to which that P&O Princess Shareholder is entitled for each P&O Princess Share. This structure allows P&O Princess Shareholders to benefit fully from any upturn in the sector, whilst retaining the option to receive the certainty of a cash element when the formal offer is made.
To satisfy the Partial Cash Alternative, Carnival requires cash of approximately $2.4 billion. Carnival currently has cash and existing undrawn debt facilities of over $2.4 billion.
12. Fractional entitlements
Fractional entitlements to New Carnival Shares arising under the Increased Offer will be aggregated and sold in the market and the proceeds (converted into pounds sterling at the prevailing exchange rate) remitted to the persons entitled thereto, except that amounts of less than 3 pounds sterling will be retained for the benefit of the Enlarged Carnival Group.
13. P&O Princess Employee Share Incentive Plans
The Increased Offer will extend to any P&O Princess Shares which are unconditionally allotted or issued before the date on which the Increased Offer closes (or such earlier date as Carnival may, subject to the City Code, decide), as a result of the exercise of options granted under the P&O Princess Employee Share Incentive Plans or otherwise. If the Increased Offer is declared unconditional in all respects, appropriate proposals will be made to participants in the P&O Princess Employee Share Incentive Plans.
14. Compulsory acquisition and application for delisting of P&O Princess Shares
If the Increased Offer becomes, or is declared, unconditional in all respects, and sufficient acceptances are received, Carnival intends to implement the procedures under sections 428 to 430F of the Companies Act to acquire compulsorily any outstanding P&O Princess Shares not acquired or agreed to be acquired pursuant to the Increased Offer.
When the Increased Offer becomes, or is declared, unconditional in all respects, Carnival intends to procure the making of an application by P&O Princess for the removal of P&O Princess Shares from the Official List and for the cancellation of trading of P&O Princess Shares on the London Stock Exchange's market for listed securities. It is anticipated that such cancellation of listing and trading will take effect no earlier than 20 business days after the Increased Offer becomes, or is declared, unconditional in all respects. Such cancellation of listing and trading would significantly reduce the liquidity and marketability of P&O Princess Shares that have not assented to the Increased Offer.
15. Interests in P&O Princess Shares
Neither Carnival, nor any of the directors of Carnival, nor, so far as Carnival is aware, any other party acting in concert with Carnival, owns or controls any P&O Princess Shares or holds any option to purchase any P&O Princess Shares or has entered into any derivatives referenced to P&O Princess Shares, except that Mr. A. Kirk Lanterman, a director of Carnival, owns 10,000 P&O Princess Shares.
SOURCE Carnival Corporation
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