Filing under Rule 425 under
the Securities Act of 1933
and deemed filed under Rule 14d-2
of the Securities Exchange Act of 1934
Filing by: Carnival Corporation
Subject Company: P&O Princess Cruises plc.
SEC File No. of Princess: 001-15136
On December 16, 2001, Carnival Corporation announced a pre-conditional
offer for all of the ordinary shares of P&O Princess Cruises plc. to be made by
on behalf of Carnival by Merrill Lynch International and UBS Warburg Ltd. In
connection with the pre-conditional offer:
(a) On December 16, 2001, Carnival published an announcement in
the United Kingdom relating to the pre-conditional offer,
attached hereto as EXHIBIT A;
(b) On December 16, 2001, Carnival issued a press release in the
United States relating to the pre-conditional offer, attached
hereto as EXHIBIT B;
(c) On December 17, 2001, Carnival hosted a public presentation
relating to the offer and used the set of slides attached
hereto as EXHIBIT C.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this filing and the documents attached hereto
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. We have tried, wherever possible, to
identify such statements by using words such as "anticipate," "assume,"
"believe," "expect," "intend," "plan" and words and terms of similar substance
in connection with any discussion of future operating or financial performance.
These forward-looking statements, including those which may impact the
forecasting of Carnival's net revenue yields, booking levels, price, occupancy
or business prospects, involve known and unknown risks, uncertainties and other
factors, which may cause Carnival's actual results, performances or achievements
to be materially different from any future results, performances or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions which may
impact levels of disposable income of consumers and the net revenue yields for
Carnival's cruise products; consumer demand for cruises and other vacation
options; other vacation industry competition; effects on consumer demand of
armed conflicts, political instability, terrorism, the availability of air
service and adverse media publicity; increases in cruise industry and vacation
industry capacity; continued availability of attractive port destinations;
changes in tax laws and regulations; Carnival's ability to implement its
shipbuilding program and to continue to expand its business outside the North
American market; Carnival's ability to attract and retain shipboard crew;
changes in foreign currency rates, security expenses, food, fuel, insurance and
commodity prices and interest rates; delivery of new ships on schedule and at
the contracted prices; weather patterns; unscheduled ship repairs and dry-
2
docking; incidents involving cruise ships; impact of pending or threatened
litigation; and changes in laws and regulations applicable to Carnival.
We caution the reader that these risks may not be exhaustive. Carnival
operates in a continually changing business environment, and new risks emerge
from time to time. Carnival cannot predict such risks nor can it assess the
impact, if any, of such risks on its business or the extent to which any risk,
or combination of risks may cause actual results to differ from those projected
in any forward-looking statements. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
Carnival plans to file a registration statement on Form S-4 and a
statement on Schedule TO with the SEC in connection with the offer. The Form S-4
will contain a prospectus and other documents relating to the offer. Carnival
plans to mail the prospectus contained in the Form S-4 to stockholders of Port
when the Form S-4 is filed with the SEC. The Form S-4, the prospectus and the
Schedule TO will contain important information about Carnival, Port, the offer
and related matters. Investors and stockholders should read the Form S-4, the
prospectus, the Schedule TO and the other documents filed with the SEC in
connection with the offer carefully before they make any decision with respect
to the offer. The Form S-4, the prospectus, the Schedule TO and all other
documents filed with the SEC in connection with the offer will be available when
filed free of charge at the SEC's web site, at www.sec.gov. In addition, the
prospectus and all other documents filed with the SEC in connection with the
offer will be made available to investors free of charge by writing to:
Carnival Corporation
Tim Gallagher
Carnival Place
3655 N.W. 87 Avenue
Miami, Florida 33178-2428
In addition to the Form S-4, prospectus, the Schedule TO and the other
documents filed with the SEC in connection with the offer, Carnival is obligated
to file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements and
other information filed with the SEC at the SEC's public reference room at 450
Fifth street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Filings
with the SEC also are available to the public from commercial document-retrieval
services and at the web site maintained by the SEC at www.sec.gov.
EXHIBIT A
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA OR
JAPAN
CARNIVAL CORPORATION ("CARNIVAL")
----------------------------------------------------------
PRE-CONDITIONAL OFFER TO BE MADE BY
MERRILL LYNCH AND UBS WARBURG
FOR P&O PRINCESS CRUISES PLC ("P&O PRINCESS")
SUMMARY
o The board of Carnival today announces the terms of a pre-conditional offer
to acquire the whole of the issued and to be issued share capital of P&O
Princess.
o The Offer comprises 200 pence in cash and 0.1361 Carnival Shares for each
P&O Princess Share with a Mix and Match Election, as described below.
o Based on the New York Stock Exchange closing price of a Carnival Share of
$27.30 on 14 December 2001, the last business day prior to the date of this
Announcement, and an exchange rate of $1:L0.689, the Offer values each P&O
Princess Share at 456 pence and the entire existing share capital of P&O
Princess at approximately L3.2 billion.
o The Offer represents:
- a premium of 44 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; and
- a premium of 27 per cent. to the closing middle market price of 360
pence per P&O Princess Share on 14 December 2001, the last business day
prior to the date of this Announcement.
o If, before the first closing date of the Offer, the board of P&O Princess
is able to achieve a reduction in the cost of the Break Fee and of exiting
the Joint Venture, then Carnival will be prepared to share the savings, net
of costs, with P&O Princess Shareholders.
o The combination of Carnival and P&O Princess will create a global vacation
and leisure company with a strong and flexible financial position. Carnival
believes that the Offer is significantly more attractive to P&O Princess
Shareholders than the Royal Caribbean Proposal.
o Carnival has the strongest operating and financial record among the listed
cruise companies and believes that the adoption of best practice from the
two management teams will generate significant benefits for customers and
shareholders.
o The acquisition of P&O Princess is expected to be earnings enhancing for
Carnival in the first full financial year of ownership.*
* THIS STATEMENT SHOULD NOT BE INTERPRETED TO MEAN THAT THE EARNINGS PER
CARNIVAL SHARE FOR THE CURRENT OR FUTURE FINANCIAL YEARS WILL NECESSARILY MATCH
OR EXCEED THE HISTORICAL PUBLISHED EARNINGS PER CARNIVAL SHARE.
o Carnival has had a number of discussions over recent years with P&O
Princess and its former parent, P&O, regarding a possible combination of
Carnival and P&O Princess. On 24 September 2001, only eight weeks prior to
the announcement of the Royal Caribbean Proposal, Carnival contacted P&O
Princess proposing a combination, but has received no response to this
approach.
o HAVING CONSIDERED ITS OPTIONS FOLLOWING THE ANNOUNCEMENT OF THE ROYAL
CARIBBEAN PROPOSAL ON 20 NOVEMBER 2001, CARNIVAL SUBMITTED A DETAILED
PROPOSAL REGARDING AN OFFER FOR P&O PRINCESS TO THE BOARD OF P&O PRINCESS
ON THURSDAY, 13 DECEMBER 2001. THE PROPOSAL INCLUDED A REQUEST THAT A
RECOMMENDATION BE FORTHCOMING FROM THE BOARD OF P&O PRINCESS FOR THE OFFER.
A COPY OF THIS PROPOSAL IS SET OUT AS APPENDIX V.
1
o As of the publication of this Announcement, neither P&O Princess nor its
advisors have entered into any discussion with Carnival or its advisors
regarding the proposal. The board of P&O Princess has, however, today
written to Carnival rejecting the Offer, stating a belief that the Offer is
not as favourable financially to the P&O Princess Shareholders and would
face greater execution risk than the Royal Caribbean Proposal.
o The posting of the Offer Document is pre-conditional, INTER ALIA, on the
board of P&O Princess either not convening the EGM for the approval of the
Royal Caribbean Proposal, or, if it is under an obligation to convene such
meeting, recommending that shareholders vote against the Royal Caribbean
Proposal.
o The posting of the Offer Document is also pre-conditional on certain
regulatory clearances being obtained. Given the probable regulatory
timetable, the posting of the Offer Document is also pre-conditional on
financing to avoid incurring unnecessary expense. Carnival currently has
cash and existing facilities of approximately $2.4 billion.
o CARNIVAL WILL NOT PROCEED WITH THE OFFER IF THE P&O PRINCESS SHAREHOLDERS
APPROVE THE ROYAL CARIBBEAN PROPOSAL.
REASONS FOR THE OFFER
BENEFITS OF THE PROPOSED COMBINATION OF CARNIVAL AND P&O PRINCESS
o 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 and Europe, the combined group will have an
enhanced ability to attract customers from land-based vacations to cruise
vacations.
o Carnival expects that the proposed combination will generate significant
synergies to the benefit of both shareholders and customers. These savings
are expected to come by sharing the best practices of the two management
teams to achieve efficiencies from, INTER ALIA, purchasing, marketing and
information systems, and also from rationalising support operations in
locations served by both companies.
o 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 Offer will ensure that the proposed combination of
Carnival and P&O Princess would retain a strong financial position with an
investment grade credit rating.
o Carnival believes that P&O Princess Shareholders would be better served
through a combination with Carnival than with Royal Caribbean. The greater
strength of Carnival's management team is evidenced by a comparison of the
financial and operating performance of Royal Caribbean and Carnival:
- Carnival shareholder returns have consistently outperformed those of
Royal Caribbean;
- Carnival's operational measures are consistently and significantly
better than those of Royal Caribbean; and
- Carnival has significantly greater balance sheet strength and
flexibility than Royal Caribbean.
o Carnival believes that its Offer bears no greater regulatory risk than the
Royal Caribbean Proposal. Carnival believes, as Royal Caribbean and P&O
Princess have already stated, that cruise operators compete in a broad
vacation market, rather than simply a cruise market and, accordingly, both
companies undertake substantial efforts to attract consumers from other
vacation options. Carnival believes that Carnival and Royal Caribbean are
similarly situated within the wider vacation market based on all meaningful
comparators. Carnival has examined the requirements for approval and has
received advice from its external antitrust advisors that the likelihood of
Carnival achieving a favourable regulatory outcome in the EU and US is no
less than that of the Royal Caribbean Proposal.
2
THE ROYAL CARIBBEAN PROPOSAL IS DISADVANTAGEOUS TO P&O PRINCESS SHAREHOLDERS
o Under the Royal Caribbean Proposal P&O Princess Shareholders do not receive
any premium or cash consideration.
o Under the Royal Caribbean Proposal P&O Princess Shareholders will own 50.7
per cent. of the combined entity but, based on selected analysts'
forecasts, P&O Princess is expected to contribute significantly more than
this proportion to the combined entity's net income before synergies.
Accordingly, a disproportionate share of the earnings, as well as the
synergy benefits, is expected to accrue to Royal Caribbean Shareholders
rather than to P&O Princess Shareholders.
o Royal Caribbean is highly geared and currently has a sub-investment grade
credit rating. Given the uncertain economic environment, as well as the
significant capital commitments that Royal Caribbean and P&O Princess have
made, Carnival believes that a strong and flexible balance sheet is
essential. P&O Princess's credit rating has already been downgraded in
anticipation of the Royal Caribbean Proposal. Carnival believes that the
Royal Caribbean Proposal does not compensate P&O Princess Shareholders for
the extra financial risk P&O Princess would bear if the transaction were
consummated.
o The most senior management position in the combined group has been awarded
to the Royal Caribbean Chairman and CEO. However, P&O Princess's
operational and financial performance has been superior to that of Royal
Caribbean, which has lagged both Carnival and P&O Princess. Carnival
believes that P&O Princess Shareholders should consider whether the
decision to appoint Royal Caribbean's Chairman and CEO to the most senior
position in the combined group is in their best interests.
o Carnival believes that the complex DLC structure in the Royal Caribbean
Proposal may constrain P&O Princess's ability to raise capital, make
acquisitions and engage in other corporate activity. Furthermore, there can
be no assurance that P&O Princess will not trade at a discount to Royal
Caribbean after the Royal Caribbean Proposal has been implemented.
o Carnival firmly believes that the Joint Venture and the Break Fee, both
entered into without shareholder approval, have the effect of depriving P&O
Princess Shareholders of the full value of their shares. Both agreements
deviate from permitted norms in public UK takeovers and mergers. Carnival
would have been able to offer a higher price to P&O Princess Shareholders
had these "poison pills" not been put in place.
GENERAL
MICKY ARISON, THE CHAIRMAN AND CHIEF EXECUTIVE OF CARNIVAL, SAID:
"WE BELIEVE OUR PROPOSAL IS CLEARLY MORE FAVOURABLE TO P&O PRINCESS SHAREHOLDERS
THAN THE ROYAL CARIBBEAN DEAL. WE ARE OFFERING A SUBSTANTIAL PREMIUM AND WE ARE
A MUCH STRONGER PARTNER FOR P&O PRINCESS, BOTH FINANCIALLY AND OPERATIONALLY."
There will be a UK and European analysts' presentation at 9.00 a.m. (GMT) and a
press briefing at 1.00 p.m. on Monday 17 December 2001. The venue for both will
be the offices of UBS Warburg, 1 Finsbury Avenue, London, EC2M 2PP.
There will be a dial-in conference call facility for the 9.00 a.m. (GMT)
analysts' presentation. The number for this facility is +44 (0) 20 8781 0596;
password: Carnival.
There will be a US and European analyst conference call at 3.00 p.m. (GMT) /
10.00 a.m. (EST). The number for this facility is +1 800 553 2165; password:
Carnival
The presentation slides will also be available on the internet at the following
address: www.carnivalcorp.com.
3
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE FULL TEXT OF THIS
ANNOUNCEMENT WHICH INCLUDES CARNIVAL'S DETAILED PROPOSAL TO THE BOARD OF P&O
PRINCESS (APPENDIX V).
ENQUIRIES:
CARNIVAL Telephone: +44 20 7567 4861
Micky Arison
Howard Frank
CARNIVAL (US CONTACT) Telephone: +1 305 599 2600, Ext: 16000
Tim Gallagher
Jennifer de la Cruz
MERRILL LYNCH Telephone: +44 20 7628 1000
Philip Yates
James Agnew
Stuart Faulkner
UBS WARBURG Telephone: +44 20 7567 8000
Tom Cooper
Alistair Defriez
Philip Ellick
FINANCIAL DYNAMICS Telephone: +44 20 7831 3113
Nic Bennett
Scott Fulton
Unless otherwise determined by Carnival and permitted by applicable law and
regulation, the Offer will not be made, directly or indirectly, in or into, or
by use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or of any facility of a national securities exchange of, nor will it be made
in or into Australia, Canada or Japan and the Offer will not be capable of
acceptance by any such use, means, instrumentality or facilities. Accordingly,
unless otherwise determined by Carnival and permitted by applicable law and
regulation, copies of this Announcement and any other documents related to the
Offer are not being, and must not be, mailed or otherwise forwarded, distributed
or sent in or into Australia, Canada or Japan and persons receiving such
documents (including custodians, nominees and trustees) must not distribute or
send them in, into or from such jurisdictions.
The availability of the Offer to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdictions in which they are located.
Persons who are not resident in the United Kingdom should inform themselves of,
and observe, any applicable requirements.
The Offer will be made in the United States by Carnival. References in this
Announcement to the Offer being made by Merrill Lynch or UBS Warburg should be
read accordingly.
Merrill Lynch International and UBS Warburg Ltd., a subsidiary of UBS AG, are
acting as joint financial advisors and joint corporate brokers exclusively to
Carnival and no-one else in connection with the Offer and will not be
responsible to anyone other than Carnival for providing the protections afforded
to clients respectively of Merrill Lynch International and UBS Warburg Ltd. as
the case may be or for providing advice in relation to the Offer.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Carnival has tried, wherever possible, to identify such statements by using
words such as "anticipate," "assume," "believe," "expect," "intend," "plan" and
words and terms of similar substance in connection with any discussion of future
operating or financial performance. These forward-looking statements, including
those which may impact the forecasting of Carnival's net revenue yields, booking
levels, price, occupancy or business prospects, involve known and unknown risks,
uncertainties and other factors, which may cause Carnival's actual results,
performances or achievements to be materially different from any future results,
performances or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions which may impact levels of disposable income of
consumers and the net revenue yields for Carnival's cruise products; consumer
demand for cruises and other vacation options; other vacation industry
competition; effects on consumer demand of armed conflicts, political
instability, terrorism, the availability of air service and adverse media
publicity; increases in cruise industry and vacation industry capacity;
continued availability of attractive port destinations; changes in tax laws and
regulations; Carnival's ability to implement its shipbuilding program and to
continue to expand its business outside the North American market; Carnival's
ability to attract and retain shipboard crew; changes in foreign currency rates,
security expenses, food, fuel, insurance and commodity prices and interest
rates; delivery of new ships on schedule and at the contracted prices; weather
patterns; unscheduled ship repairs and dry-docking; incidents involving cruise
ships; impact of pending or threatened litigation; and changes in laws and
regulations applicable to Carnival.
Carnival cautions the reader that these risks may not be exhaustive. Carnival
operates in a continually changing business environment, and new risks emerge
from time to time. Carnival cannot predict such risks nor can it assess the
impact, if any, of such risks on its business or the extent to which any risk,
or combination of risks may cause actual results to differ from those projected
in any forward-looking statements. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results. Carnival undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
4
CARNIVAL PLANS TO FILE A REGISTRATION STATEMENT ON FORM S-4 AND A STATEMENT ON
SCHEDULE TO WITH THE US SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH
THE OFFER. THE FORM S-4 WILL CONTAIN A PROSPECTUS AND OTHER DOCUMENTS RELATING
TO THE OFFER. CARNIVAL PLANS TO MAIL THE PROSPECTUS CONTAINED IN THE FORM S-4 TO
SHAREHOLDERS OF PORT WHEN THE FORM S-4 IS FILED WITH THE SEC. THE FORM S-4, THE
PROSPECTUS AND THE SCHEDULE TO WILL CONTAIN IMPORTANT INFORMATION ABOUT
CARNIVAL, PORT, THE OFFER AND RELATED MATTERS. INVESTORS AND STOCKHOLDERS SHOULD
READ THE FORM S-4, THE PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS FILED
WITH THE SEC IN CONNECTION WITH THE OFFER CAREFULLY BEFORE THEY MAKE ANY
DECISION WITH RESPECT TO THE OFFER. THE FORM S-4, THE PROSPECTUS, THE SCHEDULE
TO AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE OFFER WILL
BE AVAILABLE WHEN FILED FREE OF CHARGE AT THE SEC'S WEB SITE, AT WWW.SEC.GOV. IN
ADDITION, THE PROSPECTUS AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN
CONNECTION WITH THE OFFER WILL BE MADE AVAILABLE TO INVESTORS FREE OF CHARGE BY
WRITING TO TIM GALLAGHER AT CARNIVAL CORPORATION, CARNIVAL PLACE, 3655 N.W. 87
AVENUE, MIAMI, FLORIDA, 33178-2428, US.
IN ADDITION TO THE FORM S-4, PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS
FILED WITH THE SEC IN CONNECTION WITH THE OFFER, CARNIVAL IS OBLIGATED TO FILE
ANNUAL, QUARTERLY AND SPECIAL REPORTS, PROXY STATEMENTS AND OTHER INFORMATION
WITH THE SEC. PERSONS MAY READ AND COPY ANY REPORTS, STATEMENTS AND OTHER
INFORMATION FILED WITH THE SEC AT THE SEC'S PUBLIC REFERENCE ROOM AT 450 FIFTH
STREET, N.W., WASHINGTON, D.C. 20549. PLEASE CALL THE SEC AT 1-800-SEC-0330 FOR
FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOM. FILINGS WITH THE SEC ALSO ARE
AVAILABLE TO THE PUBLIC FROM COMMERCIAL DOCUMENT-RETRIEVAL SERVICES AND AT THE
WEB SITE MAINTAINED BY THE SEC AT WWW.SEC.GOV.
5
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA OR
JAPAN
CARNIVAL CORPORATION ("CARNIVAL")
----------------------------------------------------------
PRE-CONDITIONAL OFFER TO BE MADE BY
MERRILL LYNCH AND UBS WARBURG
FOR P&O PRINCESS CRUISES PLC("P&O PRINCESS")
1. INTRODUCTION
The board of Carnival today announces the terms of a pre-conditional offer to
acquire the whole of the issued and to be issued share capital of P&O Princess.
2. THE OFFER
The Offer, the terms and conditions of which will be set out in the Offer
Document when issued, will be made on the following basis:
FOR EACH P&O PRINCESS SHARE 200 PENCE IN CASH,
AND
0.1361 CARNIVAL SHARES
and so in proportion for any other number of P&O Princess Shares held.
Based on the New York Stock Exchange closing price of a Carnival Share of $27.30
on 14 December 2001, the last business day prior to the date of this
Announcement, and an exchange rate of $1:L0.689, the Offer values each P&O
Princess Share at 456 pence and the entire existing ordinary share capital of
P&O Princess at approximately L3.2 billion. The Offer represents:
o a premium of 44 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; and
o a premium of 27 per cent. to the closing middle market price of 360 pence
per P&O Princess Share on 14 December 2001, the last business day prior to
the date of this Announcement.
The acquisition of P&O Princess is expected to be earnings enhancing for
Carnival in the first full financial year of ownership.*
* THIS STATEMENT SHOULD NOT BE INTERPRETED TO MEAN THAT THE EARNINGS PER
CARNIVAL SHARE FOR THE CURRENT OR FUTURE FINANCIAL YEARS WILL NECESSARILY MATCH
OR EXCEED THE HISTORICAL PUBLISHED EARNINGS PER CARNIVAL SHARE.
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 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 Offer for non-fulfilment of the Conditions, to reduce the cash consideration
for each P&O Princess Share under the Offer by an amount equal to the excess.
If, before the first closing date of the Offer, the board of P&O Princess is
able to achieve a reduction in the cost of the Break Fee and of exiting the
Joint Venture, then Carnival will be prepared to share the savings,
6
net of costs, with P&O Princess Shareholders. This is subject to the overall
final cost to P&O Princess not exceeding $262.5 million. Carnival will announce
the basis of such sharing once the saving, if any, has been established.
There will be a Mix and Match Election, as described in paragraph 10 below.
The posting of the Offer Document is subject to the Pre-conditions set out in
Appendix I relating to, INTER ALIA, the board of P&O Princess either not
convening the EGM for the approval of the Royal Caribbean Proposal, or, if it is
under an obligation to convene such meeting, recommending that shareholders vote
against the Royal Caribbean Proposal.
Similarly, the posting of the Offer Document is pre-conditional on the P&O
Princess Shareholders not having passed the resolutions required to approve the
Royal Caribbean Proposal.
The posting of the Offer Document is also pre-conditional on certain regulatory
clearances being obtained. Given the probable regulatory timetable, the posting
of the Offer Document is also pre-conditional on financing.
Carnival intends to post the Offer Document as soon as practicable after the
Pre-conditions have been satisfied or waived. Carnival shall be entitled to
waive all and any of the Pre-conditions other than that relating to financing.
The 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 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 Offer for the P&O Princess Shares, an offer will be made
to holders of P&O Princess ADRs to tender the ADSs underlying such P&O Princess
ADRs.
The issue of the New Carnival Shares is not conditional upon Carnival
shareholder approval.
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 Offer becoming wholly unconditional.
Carnival intends to seek a listing of the existing Carnival Shares and the New
Carnival Shares on the London Stock Exchange, should Carnival perceive there to
be sufficient demand for such a facility. Application will be made for the New
Carnival Shares to be admitted to listing on the New York Stock Exchange.
Further details on settlement, listing and dealings will be included in the
Offer Document and Form of Acceptance to be sent to the P&O Princess
Shareholders.
3. BACKGROUND TO THE OFFER
Carnival has had a number of discussions over recent years with P&O Princess and
its former parent, P&O, regarding a possible combination of Carnival and P&O
Princess. On 24 September 2001, only eight weeks prior to the announcement of
the Royal Caribbean Proposal, Carnival contacted P&O Princess proposing a
combination but has received no response to this approach. Having considered its
options following the announcement of the Royal Caribbean Proposal on 20
November 2001, Carnival submitted a detailed proposal regarding an offer for P&O
Princess to the board of P&O Princess on Thursday, 13 December 2001. The
proposal included a request that a recommendation be forthcoming from the board
of P&O Princess for the Offer. A copy of this proposal is set out as Appendix V.
As of the publication of this Announcement, neither P&O Princess nor its
advisors have entered into any discussion with Carnival or its advisors
regarding the proposal. The board of P&O Princess has, however, today written to
Carnival rejecting the Offer, stating a belief that the Offer is not as
favourable financially to the P&O Princess Shareholders and would face greater
execution risk than the Royal Caribbean Proposal.
7
4. REASONS FOR THE OFFER
BENEFITS OF THE PROPOSED COMBINATION OF CARNIVAL AND P&O PRINCESS
o 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 and Europe, the combined group will have an
enhanced ability to attract customers away from land-based vacations to
cruise vacations.
o Carnival expects that the proposed combination will generate significant
synergies to the benefit of both shareholders and customers. These savings
are expected to come by sharing the best practices of the two management
teams to achieve efficiencies from, INTER ALIA, purchasing, marketing and
information systems, and also from rationalising support operations in
locations served by both companies.
o 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 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.
THE ROYAL CARIBBEAN PROPOSAL IS DISADVANTAGEOUS TO P&O PRINCESS SHAREHOLDERS
The proposed transaction between P&O Princess and Royal Caribbean is, in
Carnival's view, disadvantageous to P&O Princess Shareholders, as the terms of
the transaction fail to recognise a number of substantive issues:
o Under the Royal Caribbean Proposal P&O Princess Shareholders do not receive
any premium or cash consideration;
o Under the Royal Caribbean Proposal P&O Princess Shareholders will own 50.7
per cent. of the combined entity but, based on selected analysts'
forecasts, P&O Princess is expected to contribute significantly more than
this to the combined entity's net income before synergies. P&O Princess's
contribution, based on publicly available selected analysts' forecasts,
where 2003 estimates are available, is as follows:
P&O PRINCESS EARNINGS
CONTRIBUTION PRE SYNERGIES
DATE 2002 2003
- --------------------------------------------------------------------------------
Schroder Salomon Smith Barney 29 November 2001 64.4% 57.7%
Bear Stearns 9 November 2001 53.0% 57.7%
21 November 2001
Morgan Stanley 21 November 2001 59.5% 45.7%
UBS Warburg 5 December 2001 65.5% 59.6%
Accordingly, a disproportionate share of the earnings as well as the
synergy benefits is expected to accrue to Royal Caribbean Shareholders,
rather than to P&O Princess Shareholders;
o Royal Caribbean is highly geared and currently has a sub-investment grade
credit rating. The terrorist events of 11 September 2001 have had a
significant negative impact on the vacation industry and such an event
could happen again. Given these uncertain times, as well as the significant
capital commitments that Royal Caribbean and P&O Princess have made,
Carnival believes that a strong and flexible balance sheet is essential.
P&O Princess's credit rating has already been downgraded in anticipation of
the Royal Caribbean Proposal. Carnival believes that the Royal Caribbean
Proposal does not compensate
8
P&O Princess Shareholders for the extra financial risk P&O Princess would
bear if the transaction were consummated;
o The most senior management position in the combined group has been awarded
to the Royal Caribbean Chairman and CEO. However, P&O Princess's
operational and financial performance has been superior to that of Royal
Caribbean, which has lagged both Carnival and P&O Princess. Carnival
believes that P&O Princess Shareholders should consider whether the
decision to appoint Royal Caribbean's Chairman and CEO to the most senior
position in the combined group is in their best interests.
o Carnival believes that the complex DLC structure in the Royal Caribbean
Proposal may constrain P&O Princess's ability to raise capital, make
acquisitions and engage in other corporate activity. Furthermore, there can
be no assurance that P&O Princess will not trade at a discount to Royal
Caribbean after the Royal Caribbean Proposal has been implemented; and
o Carnival firmly believes that the Joint Venture and the Break Fee, both
entered into without shareholder approval, have the effect of depriving P&O
Princess Shareholders of the full value of their shares. Carnival would
have been able to offer a higher price to P&O Princess Shareholders had
these "poison pills" not been put in place. Accordingly, P&O Princess
should disclose full details of the Joint Venture and the Break Fee to
enable Carnival to assess any net saving. Carnival has reviewed the
publicly available information on the Joint Venture and the Break Fee and
makes the following observations:
- no substantive commercial reason has been advanced for the immediate
need to conclude the Joint Venture agreement, with its associated costs
on a change of control, particularly when the Joint Venture itself is
not intended to commence cruise operations until 2003. Indeed, Carnival
believes the Joint Venture company's aims could be achieved solely
through the Royal Caribbean Proposal. The main, if not sole, effect of
the Joint Venture is, in the opinion of Carnival, to make P&O Princess
less attractive and less vulnerable to a third party offeror, as it
seriously disadvantages P&O Princess if there is a change of control of
P&O Princess. Carnival believes that this is clearly contrary to the
interests of P&O Princess Shareholders; and
- the Break Fee is significantly in excess of the UK market norm. On 19
November 2001, P&O Princess's market capitalisation was approximately
$3.1 billion and, therefore, the size of the Break Fee greatly exceeds
the maximum that would have been permitted under the City Code (which
is recognised in the UK as best practice) of 1 per cent. or
approximately $31 million.
WHY CARNIVAL IS THE BETTER PARTNER FOR P&O PRINCESS
The board of Carnival firmly believes that Carnival is the better partner for
P&O Princess. Set out below are a number of key historic measures that compare
the financial and operating performance of Royal Caribbean and Carnival. These
data reinforce Carnival's belief that Carnival's management team has a stronger
track record, clearly focused on enhancing shareholder value, which will be
critical in rapidly delivering the synergies a combination should bring.
o Carnival shareholder returns have consistently outperformed those of Royal
Caribbean
TOTAL SHAREHOLDERS RETURNS TO 14 DECEMBER 2001 CARNIVAL ROYAL CARIBBEAN
Last 12 months 7.3% (26.6%)
Last 5 years 92.7% 41.2%
- - Carnival's operational measures are consistently and significantly better
than those of Royal Caribbean
EBITDA PER AVAILABLE BERTH DAY ($) CARNIVAL ROYAL CARIBBEAN
2000 80 64
1995 - 2000 average 81 57
9
EBITDA MARGIN CARNIVAL ROYAL CARIBBEAN
2000 33.6% 27.9%
1995 - 2000 average 34.5% 24.8%
ROIC CARNIVAL ROYAL CARIBBEAN
2000 12.9% 9.0%
1995 - 2000 average 15.0% 9.6%
o Carnival has significantly greater balance sheet strength and flexibility
than Royal Caribbean
NET DEBT AT YEAR END/EBITDA CARNIVAL ROYAL CARIBBEAN
2000 1.7x 4.0x
1995 - 2000 average 1.4x 4.0x
EBITDA/CASH INTEREST EXPENSE CARNIVAL ROYAL CARIBBEAN
2000 15.4x 4.0x
1995 - 2000 average 11.6x 3.7x
CREDIT RATINGS(1) CARNIVAL ROYAL CARIBBEAN
S&P A BB+
Outlook Negative Negative
Moody's A2 Ba2
Outlook Negative Stable
- ------------------------
(1) PRIOR TO THE ANNOUNCEMENT OF THE ROYAL CARIBBEAN PROPOSAL
Based on Carnival's performance as outlined above, Carnival believes that P&O
Princess Shareholders would be better served through a combination with Carnival
than with Royal Caribbean.
5. REGULATORY APPROVALS
Carnival believes that its Offer bears no greater regulatory risk than the Royal
Caribbean Proposal. Carnival believes, as Royal Caribbean and P&O Princess have
already stated, that cruise operators compete in a broad vacation market, rather
than simply a cruise market and, accordingly, both companies undertake
substantial efforts to attract consumers from other vacation options. Carnival
and Royal Caribbean are similarly situated within the wider vacation market on
all meaningful comparators. Carnival has examined the requirements for approval
and has received advice from its external antitrust advisors that the likelihood
of Carnival achieving a favourable regulatory outcome in the EU and US is no
less than that of the Royal Caribbean Proposal.
6. INFORMATION ON CARNIVAL
Carnival is the world's largest multiple-night cruise company based on the
number of consumers served. The Carnival Group offers a broad range of cruise
brands serving the vacation market through Carnival Cruise Lines, Holland
America Line, Costa Cruises, Cunard Line, Seabourn Cruise Line and Windstar
Cruises. Carnival's various brands operate 43 ships, offering a total of 60,472
berths, in the Caribbean, Alaska, Europe, Mexican Riviera, South America and
other worldwide destinations. Carnival has 14 new ships on order, which will
offer a further 34,704 berths. These ships are expected to enter service over
the period
10
from December 2001 through to mid-2005. In addition to its cruise operations,
Carnival operates a tour business, through Holland America Tours which markets
sightseeing tours both separately and as a part of its cruise/tour packages.
Carnival's business strategy is to use this wide, diverse range of options to
attract consumers from other land-based vacation choices.
Carnival was incorporated under the laws of the Republic of Panama in November
1974 and is listed on the New York Stock Exchange.
In the year ended 30 November 2000, Carnival reported turnover of US$3,778.5
million (1999: US$3,497.5 million) and operating profit of US$983.0 million
(1999: US$1,019.7 million). Reported earnings per share (basic) were US$1.61
(1999: US$1.68). Net assets at 30 November 2000 were US$5,870.6 million (1999:
US$5,931.2 million).
7. INFORMATION ON P&O PRINCESS
P&O Princess is a global cruise vacation company operating under the following
brand names: Princess Cruises in North America; P&O Cruises in the United
Kingdom and in Australia; AIDA, A'ROSA and Seetours in Germany and Swan Hellenic
also in the United Kingdom. It provides cruises to Alaska, the Caribbean,
Europe, the Panama Canal and other exotic destinations. The P&O Princess Group
currently has a fleet of 18 ships offering a total of 27,370 berths, with 8 new
ships on order, offering a further 17,520 berths. The new ships are expected to
be delivered over the period from the first quarter of 2002 through to the
second quarter of 2004. Princess' tour division, Princess Tours, is a tour
operator in Alaska with four riverside lodges (with a fifth being built), a
fleet of deluxe motorcoaches and luxury Midnight Sun Express rail cars.
P&O Princess was incorporated and registered in England and Wales in July 2000
and was listed in London and New York in October 2000 on its demerger from P&O.
In the year ended 31 December 2000, P&O Princess reported turnover of US$2,423.9
million (1999: US$2,111.6 million) and operating profit of US$373.1 million
(1999: US$388.3 million). Reported earnings per share (basic) were 40.1 cents
(1999: 45.5 cents). Net assets at 31 December 2000 were US$2,463.8 million
(1999: US$2,196.5 million).
8. 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's management and
employees will benefit under the Offer from a larger operating platform and a
business of greater international size and scope. Carnival operates its various
cruise businesses as separate decentralised 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.
9. FINANCING
Given the probable extended regulatory timetable and in order to avoid
unnecessary expense, the Offer is subject to the Pre-condition that financing of
the L1.4 billion ($2.0 billion) cash element of the Offer is arranged on terms
satisfactory to Carnival. Carnival currently has cash and existing facilities of
approximately $2.4 billion. Carnival intends to complete its financing
arrangements within 21 days after the announcement that the regulatory
pre-conditions (Pre-conditions 1, 2, 3 and 4) have been satisfied or waived.
The financing pre-condition (Pre-condition 9) is not waivable by Carnival.
11
10. MIX AND MATCH ELECTION
P&O Princess Shareholders (other than certain overseas shareholders) who validly
accept the Offer may elect, subject to availability, to vary the proportions in
which they receive Carnival Shares and cash in respect of their holdings in P&O
Princess Shares. The maximum number of New Carnival Shares to be issued and the
maximum amount of cash to be paid under the Offer will not be varied as a result
of the Mix and Match Election. Accordingly, Carnival's ability to satisfy Mix
and Match Elections made by P&O Princess Shareholders will depend on other P&O
Princess Shareholders making equal and opposite elections.
P&O Princess Shareholders who make Mix and Match Elections will not know the
exact number of Carnival Shares, or the amount of cash, which they will receive
until settlement of the consideration under the Offer. An announcement will be
made, when the Offer becomes or is declared wholly unconditional, of the
approximate extent to which Mix and Match Elections will be satisfied. To the
extent that elections cannot be satisfied in full, they will be scaled down on a
pro rata basis. To the extent that elections can be satisfied, P&O Princess
Shareholders will receive Carnival Shares instead of cash or vice versa.
The Mix and Match Election will remain open until 3.00 p.m. on the first closing
date of the Offer, and may be closed then or on any subsequent closing date
without prior notice. If the Mix and Match Election has been closed, Carnival
reserves the right to re-introduce a mix and match facility, subject to the
rules of the Code. The Mix and Match Election is conditional upon the Offer
becoming or being declared unconditional in all respects.
The availability of the Mix and Match Election is subject to Carnival receiving
all required relief from the US Securities and Exchange Commission that is
necessary to implement the Mix and Match Election.
11. FRACTIONAL ENTITLEMENTS
Fractional entitlements arising under the 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 L3 will be retained for the benefit of the Enlarged Carnival Group.
12. P&O PRINCESS EMPLOYEE SHARE INCENTIVE PLANS
The Offer will extend to any P&O Princess Shares which are unconditionally
allotted or issued before the date on which the 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 Offer is declared unconditional in all respects,
appropriate proposals will be made to participants in the P&O Princess Employee
Share Incentive Plans.
13. COMPULSORY ACQUISITION AND APPLICATION FOR DELISTING OF P&O PRINCESS
SHARES
If the 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 Offer.
When the 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 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 not assented to the Offer.
14. 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
12
P&O Princess Shares or has entered into any derivatives referenced to P&O
Princess Shares, except that A. Kirk Lanterman, a director at Carnival, owns
10,000 P&O Princess Shares. In the interest of secrecy, Carnival has not made
enquiries in respect of certain of the parties who may be deemed by the Panel to
be acting in concert with it for the purposes of the Offer.
Appendix III contains the definitions of terms used in this Announcement.
ENQUIRIES:
CARNIVAL Telephone: +44 20 7567 4861
Micky Arison
Howard Frank
CARNIVAL (US CONTACT) Telephone: +1 305 599 2600, Ext: 16000
Tim Gallagher
Jennifer de la Cruz
MERRILL LYNCH Telephone: +44 20 7628 1000
Philip Yates
James Agnew
Stuart Faulkner
UBS WARBURG Telephone: +44 20 7567 8000
Tom Cooper
Alistair Defriez
Philip Ellick
FINANCIAL DYNAMICS Telephone: +44 20 7831 3113
Nic Bennett
Scott Fulton
This Announcement does not constitute an offer or an invitation to acquire
shares or securities.
GENERAL
The Offer and any acceptances thereunder will be governed by English law.
The posting of the Offer Document is subject to the Pre-conditions set out in
Appendix I, and the Offer will be subject to the Conditions and terms set out in
Appendix II and on the further terms which will be set out in the Offer Document
and Form of Acceptance when issued, together with such further terms as may be
required to comply with the provisions of the City Code.
Any person who, alone or acting together with any other person(s) pursuant to an
agreement or understanding (whether formal or informal) to acquire or control
securities of P&O Princess or Carnival, owns or controls, or become the owner or
controller, directly or indirectly of one per cent. or more of any class of
securities of P&O Princess or Carnival is generally required under the provision
of Rule 8 of the City Code to notify the London Stock Exchange and the Panel of
every dealing in such securities during the period from the date of this
Announcement until the first closing date of the Offer or, if later, the date on
which the Offer becomes, or is declared, unconditional as to acceptances or
lapses.
Dealings by Carnival or P&O Princess or by their respective "associates" (within
the definitions set out in the City Code) in any class of securities of Carnival
or P&O Princess must also be disclosed. Please consult your financial advisor
immediately if you believe this rule may be applicable to you.
Unless otherwise determined by Carnival and permitted by applicable law and
regulation, the Offer will not be made, directly or indirectly, in or into, or
by use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or of any facility of a national securities exchange of, nor will it be made
in or into Australia, Canada or Japan and the Offer will not be capable of
acceptance by any such use, means, instrumentality or facilities. Accordingly,
unless otherwise determined by Carnival and permitted by
13
applicable law and regulation, copies of this Announcement and any other
documents related to the Offer are not being, and must not be, mailed or
otherwise forwarded, distributed or sent in or into Australia, Canada or Japan
and persons receiving such documents (including custodians, nominees and
trustees) must not distribute or send them in, into or from such jurisdictions.
The availability of the Offer to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdictions in which they are located.
Persons who are not resident in the United Kingdom should inform themselves of,
and observe, any applicable requirements.
The Offer will be made in the United States by Carnival. References in this
Announcement to the Offer being made by Merrill Lynch or UBS Warburg should be
read accordingly.
Merrill Lynch International and UBS Warburg Ltd., a subsidiary of UBS AG, are
acting as joint financial advisors and joint corporate brokers exclusively to
Carnival and no-one else in connection with the Offer and will not be
responsible to anyone other than Carnival for providing the protections afforded
to clients respectively of Merrill Lynch International and UBS Warburg Ltd. as
the case may be or for providing advice in relation to the Offer.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Carnival has tried, wherever possible, to identify such statements by using
words such as "anticipate," "assume," "believe," "expect," "intend," "plan" and
words and terms of similar substance in connection with any discussion of future
operating or financial performance. These forward-looking statements, including
those which may impact the forecasting of Carnival's net revenue yields, booking
levels, price, occupancy or business prospects, involve known and unknown risks,
uncertainties and other factors, which may cause Carnival's actual results,
performances or achievements to be materially different from any future results,
performances or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions which may impact levels of disposable income of
consumers and the net revenue yields for Carnival's cruise products; consumer
demand for cruises and other vacation options; other vacation industry
competition; effects on consumer demand of armed conflicts, political
instability, terrorism, the availability of air service and adverse media
publicity; increases in cruise industry and vacation industry capacity;
continued availability of attractive port destinations; changes in tax laws and
regulations; Carnival's ability to implement its shipbuilding program and to
continue to expand its business outside the North American market; Carnival's
ability to attract and retain shipboard crew; changes in foreign currency rates,
security expenses, food, fuel, insurance and commodity prices and interest
rates; delivery of new ships on schedule and at the contracted prices; weather
patterns; unscheduled ship repairs and dry-docking; incidents involving cruise
ships; impact of pending or threatened litigation; and changes in laws and
regulations applicable to Carnival.
Carnival cautions the reader that these risks may not be exhaustive. Carnival
operates in a continually changing business environment, and new risks emerge
from time to time. Carnival cannot predict such risks nor can it assess the
impact, if any, of such risks on its business or the extent to which any risk,
or combination of risks may cause actual results to differ from those projected
in any forward-looking statements. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results. Carnival undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
CARNIVAL PLANS TO FILE A REGISTRATION STATEMENT ON FORM S-4 AND A STATEMENT ON
SCHEDULE TO WITH THE US SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH
THE OFFER. THE FORM S-4 WILL CONTAIN A PROSPECTUS AND OTHER DOCUMENTS RELATING
TO THE OFFER. CARNIVAL PLANS TO MAIL THE PROSPECTUS CONTAINED IN THE FORM S-4 TO
SHAREHOLDERS OF PORT WHEN THE FORM S-4 IS FILED WITH THE SEC. THE FORM S-4, THE
PROSPECTUS AND THE SCHEDULE TO WILL CONTAIN IMPORTANT INFORMATION ABOUT
CARNIVAL, PORT, THE OFFER AND RELATED MATTERS. INVESTORS AND STOCKHOLDERS SHOULD
READ THE FORM S-4, THE PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS FILED
WITH THE SEC IN CONNECTION WITH THE OFFER CAREFULLY BEFORE THEY MAKE ANY
DECISION WITH RESPECT TO THE OFFER. THE FORM S-4, THE PROSPECTUS, THE SCHEDULE
TO AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE OFFER WILL
BE AVAILABLE WHEN FILED FREE OF CHARGE AT THE SEC'S WEB SITE, AT WWW.SEC.GOV. IN
ADDITION, THE PROSPECTUS AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN
CONNECTION WITH THE OFFER WILL BE MADE AVAILABLE TO INVESTORS FREE OF CHARGE BY
WRITING TO TIM GALLAGHER AT CARNIVAL CORPORATION, CARNIVAL PLACE, 3655 N.W. 87
AVENUE, MIAMI, FLORIDA, 33178-2428, US.
.
IN ADDITION TO THE FORM S-4, PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS
FILED WITH THE SEC IN CONNECTION WITH THE OFFER, CARNIVAL IS OBLIGATED TO FILE
ANNUAL, QUARTERLY AND SPECIAL REPORTS, PROXY STATEMENTS AND OTHER INFORMATION
WITH THE SEC. PERSONS MAY READ AND COPY ANY REPORTS, STATEMENTS AND OTHER
INFORMATION FILED WITH THE SEC AT THE SEC'S PUBLIC REFERENCE ROOM AT 450 FIFTH
STREET, N.W., WASHINGTON, D.C. 20549. PLEASE CALL THE SEC AT 1-800-SEC-0330 FOR
FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOM. FILINGS WITH THE SEC ALSO ARE
AVAILABLE TO THE PUBLIC FROM COMMERCIAL DOCUMENT-RETRIEVAL SERVICES AND AT THE
WEB SITE MAINTAINED BY THE SEC AT WWW.SEC.GOV.
14
APPENDIX I
PRE-CONDITIONS OF THE OFFER
The making of the Offer by the posting of the Offer Document and related Form of
Acceptance will take place following the satisfaction, or to the extent
permitted, waiver by Carnival, of the following Pre-conditions:
1. insofar as the proposed acquisition of P&O Princess by Carnival
constitutes a concentration with a Community dimension within the scope
of Council Regulation (EEC) 4064/89 (as amended) (the "Merger
Regulation"):
(i) the European Commission shall have made (or be deemed to have
made) a decision, in terms satisfactory to Carnival, not to
initiate proceedings under Article 6(1)(c) of the Merger
Regulation; or
(ii) if such proceedings are initiated, the European Commission
shall have made (or be deemed to have made) a declaration or
issued a decision, in terms satisfactory to Carnival, that the
concentration (or such part of the concentration as has not
been referred to a competent authority as described in
paragraph 2 below) is compatible with the common market, any
conditions attached to the Commission's declaration or
decision being in form and substance satisfactory to Carnival;
2. if the European Commission has made a referral to a competent authority
under Article 9(1) of the Merger Regulation in connection with the
proposed acquisition of P&O Princess by Carnival, such competent
authority shall have issued such decision, finding or declaration, in
terms satisfactory to Carnival, as is necessary to approve the proposed
acquisition and permit the closing of the proposed acquisition to occur
without any breach of applicable law;
3. the expiration or early termination of all waiting periods, if any,
applicable to the contemplated transaction under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, 15 U.S.C. Section 18a;
4. at the time that the Pre-conditions in paragraphs 1, 2 and 3 above are
satisfied or waived, there being in existence no:
(i) pending or threatened action or other proceeding before any
court of appropriate jurisdiction or governmental agency
seeking to restrain, enjoin, prohibit or otherwise prevent the
consummation of the contemplated transaction or seeking to
obtain damages or other relief in connection with this
transaction which would have a material adverse effect on
either Carnival or P&O Princess; or
(ii) preliminary or permanent injunction or other order, decree,
or ruling issued by a court of appropriate jurisdiction,
which restrains, enjoins, prohibits, or otherwise makes
illegal the consummation of the contemplated transaction;
5. at the time that the Pre-conditions in paragraphs 1, 2 and 3 above are
satisfied or waived, Carnival being satisfied that the cost to P&O
Princess of terminating the Joint Venture in the event of the Offer
becoming wholly unconditional will not be in excess of $200 million;
6. Carnival having received all information which was provided by P&O
Princess to Royal Caribbean in connection with the Royal Caribbean
Proposal, as would be supplied if Rule 20.2 of the Takeover Code had
applied;
7. the board of P&O Princess either not convening the EGM for the approval
of the Royal Caribbean Proposal, or, if it is under an obligation to
convene such meeting, recommending that shareholders vote against the
Royal Caribbean Proposal;
15
8. the P&O Princess Shareholders not having passed the resolutions required
to approve the Royal Caribbean Proposal;
9. financing of the cash element of the Offer being arranged on terms
satisfactory to Carnival by no later than 21 days after the announcement
that the regulatory pre-conditions (Pre-conditions 1, 2, 3 and 4) have
been satisfied or waived.
The Offer will not be made unless all the Pre-conditions other than
Pre-condition 9 have been satisfied or waived by no later than 15 October 2002,
or such later date as Carnival may, with the approval of the Panel, determine.
Carnival shall be entitled to waive all and any of the above Pre-conditions
other than Pre-conditions 8 and 9 above.
16
APPENDIX II
CONDITIONS AND CERTAIN FURTHER TERMS OF THE OFFER
The Offer, which will, subject to the satisfaction or waiver of the
Pre-conditions referred to in Appendix I, be made by Merrill Lynch International
and UBS Warburg on behalf of Carnival, will comply with the Code and will be
governed by English law and be subject to the jurisdiction of the courts of
England. The Offer will be made on the terms and conditions set out in the Offer
Document and related Form of Acceptance.
The Offer will be conditional on:
1. valid acceptances being received (and not, where permitted, withdrawn) by
3.00 p.m. on the first closing date of the Offer (or such later time(s)
and/or date(s) as Carnival may, subject to the rules of the Code, decide)
in respect of not less than 90 per cent. (or such lesser percentage as
Carnival may decide) of the P&O Princess Shares to which the Offer
relates, provided that this condition will not be satisfied unless
Carnival and/or any of its wholly-owned subsidiaries shall have acquired
or agreed to acquire, whether pursuant to the Offer or otherwise, P&O
Princess Shares carrying, in aggregate, more than 50 per cent. of the
voting rights attaining to the P&O Princess Shares and more than 50 per
cent. of the voting rights then exercisable at a general meeting of P&O
Princess, including for this purpose to the extent (if any) required by
the Panel, any such voting rights attaching to any P&O Princess Shares
that may be unconditionally allotted or issued before the Offer becomes
or is declared unconditional as to acceptances whether pursuant to the
exercise of any outstanding conversion or subscription rights or
otherwise, and for this purpose:
(i) the expression "P&O Princess Shares to which the Offer
relates" shall be construed in accordance with sections 428 to
430F of the Companies Act; and
(ii) shares which have been unconditionally allotted but not issued
shall be deemed to carry the voting rights which they will
carry on being entered into the register of members of P&O
Princess;
2. the shareholders of P&O Princess not passing the resolutions required to
approve the Royal Caribbean Proposal;
3. if Carnival decides to seek a listing on the Official List, admission to
the Official List and admission to trading on the London Stock Exchange
of the issued share capital of Carnival including the New Carnival Shares
becoming effective by the decision of the United Kingdom Listing
Authority to admit such shares to listing being announced in accordance
with paragraph 7.1 of the Listing Rules and by the decision of the London
Stock Exchange to admit such shares to trading being announced in
accordance with the London Stock Exchange Admission Standards;
4. the Form S-4 Registration Statement registering the issuance of the New
Carnival Shares being declared effective by the US Securities and
Exchange Commission, remaining effective and not being the subject of a
stop order or other proceeding by the SEC to suspend its effectiveness;
5. the New York Stock Exchange agreeing to list the New Carnival Shares,
subject only to official notice of issuance;
6. the cost to P&O Princess of terminating the Joint Venture in the event
that the Offer becomes wholly unconditional not exceeding $200 million;
7. insofar as the proposed acquisition of P&O Princess by Carnival
constitutes a concentration with a Community dimension within the scope
of Council Regulation (EEC) 4064/89 (as amended) (the "Merger
Regulation"):
17
(i) the European Commission shall have made (or be deemed to have
made) a decision, in terms satisfactory to Carnival, not to
initiate proceedings under Article 6(1)(c) of the Merger
Regulation;
(ii) if such proceedings are initiated, the European Commission
shall have made (or be deemed to have made) a declaration or
issued a decision, in terms satisfactory to Carnival, that the
concentration (or such part of the concentration as has not
been referred to a competent authority as described in
paragraph (iii) below) is compatible with the common market,
any conditions attached to the Commission's declaration or
decision being in form and substance satisfactory to Carnival;
or
(iii) if the European Commission has made a referral to a competent
authority under Article 9(1) of the Merger Regulation in
connection with the proposed acquisition of P&O Princess by
Carnival, such competent authority shall have issued such
decision, finding or declaration, in terms satisfactory to
Carnival, as is necessary to approve the proposed acquisition
and permit the closing of the proposed acquisition to occur
without any breach of applicable law;
8. the expiration or early termination of all waiting periods, if any,
applicable to the contemplated transaction under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, 15 U.S.C. Section 18a;
9. no government or governmental, quasi-governmental, supranational,
statutory, administrative or regulatory body, authority, court, trade
agency, association, institution, environmental body or any other person
or body in any jurisdiction (each a "RELEVANT AUTHORITY") having decided
to take, instituted, implemented or threatened any action, proceedings,
suit, investigation, enquiry or reference, or made, proposed or enacted
any statute, regulation, order or decision or taken any other steps and
there not continuing to be outstanding any statute, regulation, order or
decision, which would or might:
(i) make the Offer or the acquisition of any P&O Princess Shares,
or control of P&O Princess by Carnival void, illegal or
unenforceable or otherwise materially restrict, restrain,
prohibit, delay or interfere with the implementation thereof,
or impose material additional conditions or obligations with
respect thereto, or require material amendment thereof or
otherwise challenge or interfere therewith;
(ii) require or prevent the divestiture by P&O Princess or any
member of the wider P&O Princess Group or by Carnival or any
member of the wider Carnival Group of all or a material
portion of their respective businesses, assets or property or
impose any material limitation on the ability of any of them
to conduct their respective businesses or own any of their
material assets or property;
(iii) impose any limitation on or result in a delay in the ability
of any member of the wider P&O Princess Group or the wider
Carnival Group to acquire or to hold or to exercise
effectively any rights of ownership of shares or loans or
securities convertible into shares in any member of the wider
P&O Princess Group or of the wider Carnival Group held or
owned by it or to exercise management control over any member
of the wider P&O Princess Group or of the wider Carnival Group
to an extent which is material in the context of the P&O
Princess Group taken as a whole or, as the case may be, the
Carnival Group taken as a whole;
(iv) require any member of the wider Carnival Group or the wider
P&O Princess Group to acquire or offer to acquire any shares
or other securities in any member of the wider P&O Princess
Group where such acquisition would be material in the context
of the P&O Princess Group taken as a whole;
(v) otherwise materially and adversely affect the assets,
business, profits or prospects of any member of the wider
Carnival Group or of any member of the wider P&O Princess
Group; or
18
(vi) and all applicable waiting and other time periods during which
any such Relevant Authority could decide to take, institute,
implement or threaten any such action, proceeding, suit,
investigation, enquiry or reference having expired, lapsed or
been terminated;
10. all necessary filings having been made, all applicable waiting periods
(including any extensions thereof) under any applicable legislation or
regulations of any jurisdiction having expired, lapsed or been
terminated, in each case in respect of the Offer and the acquisition of
any P&O Princess Shares, or of control of P&O Princess, by Carnival, and
all authorisations, orders, recognitions, grants, consents, licences,
confirmations, clearances, permissions and approvals ("AUTHORISATIONS")
necessary or appropriate in any jurisdiction for, or in respect of, the
Offer and the proposed acquisition of any P&O Princess Shares, or of
control of P&O Princess, by Carnival and to carry on the business of any
member of the wider Carnival Group or of the wider P&O Princess Group
having been obtained, in terms and in a form satisfactory to Carnival,
from all appropriate Relevant Authorities and from any persons or bodies
with whom any member of the wider Carnival Group or the wider P&O
Princess Group has entered into contractual arrangements and all such
Authorisations remaining in full force and effect at the time at which
the Offer becomes unconditional in all respects and Carnival having no
knowledge of an intention or proposal to revoke, suspend or modify or not
to renew any of the same and all necessary statutory or regulatory
obligations in any jurisdiction having been complied with;
11. there being no provision of any arrangement, agreement, licence, permit
or other instrument to which any member of the wider P&O Princess Group
is a party or by or to which any such member or any of their assets is or
may be bound, entitled or be subject to and which, in consequence of the
Offer or the acquisition of any P&O Princess Shares, or control of P&O
Princess, by Carnival or otherwise, would or might, to an extent which is
material in the context of the P&O Princess Group taken as a whole,
result in:
(i) any monies borrowed by, or other indebtedness actual or
contingent of, any such member of the wider P&O Princess Group
being or becoming repayable or being capable of being declared
immediately or prior to its or their stated maturity or the
ability of any such member to borrow monies or incur any
indebtedness being inhibited;
(ii) the creation of any mortgage, charge or other security
interest over the whole or any part of the business, property
or assets of any such member or any such security (whenever
arising or having arisen) being enforced or becoming
enforceable;
(iii) any such arrangement, agreement, licence or instrument being
terminated or adversely modified or any action being taken of
an adverse nature or any obligation arising thereunder;
(iv) any assets of any such member being disposed of or charged, or
right arising under which any such asset could be required to
be disposed of or charged, other than in the ordinary course
of business;
(v) the interest or business of any such member of the wider P&O
Princess Group in or with any firm or body or person, or any
agreements or arrangements relating to such interest or
business, being terminated or adversely modified or affected;
(vi) any such member ceasing to be able to carry on business under
any name under which it presently does so;
(vii) the creation of liabilities (actual or contingent) by any such
member; or
(viii) the financial or trading position of any such member being
prejudiced or adversely affected;
19
12. except as publicly announced by P&O Princess prior to the date of this
Announcement, no member of the wider P&O Princess Group having, since 31
December 2000:
(i) issued, agreed to issue or proposed the issue of additional
shares or securities of any class, or securities convertible
into, or exchangeable for or rights, warrants or options to
subscribe for or acquire, any such shares, securities or
convertible securities (save as between P&O Princess and
wholly-owned subsidiaries of P&O Princess and save for options
granted, and for any P&O Princess Shares allotted upon
exercise of options granted under the P&O Princess Employee
Share Incentive Plans) or redeemed, purchased or reduced any
part of its share capital;
(ii) recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus, dividend or other distribution
other than to P&O Princess or a wholly-owned subsidiary of P&O
Princess, other than any dividends paid or payable in respect
of the period from the date of this Announcement until the
Offer becomes wholly unconditional at times and in a manner
consistent with P&O Princess's normal practice prior to the
date of this Announcement and which do not in any event exceed
3 cents in each quarter in respect of each P&O Princess Share;
(iii) agreed, authorised, proposed or announced its intention to
propose any merger or demerger or acquisition or disposal of
assets or shares which are material in the context of the P&O
Princess Group taken as a whole (other than in the ordinary
course of trading) or to any material change in its share or
loan capital;
(iv) issued, authorised or proposed the issue of any debentures or
incurred any indebtedness or contingent liability which is
material in the context of the P&O Princess Group taken as a
whole;
(v) acquired or disposed of or transferred, mortgaged or
encumbered any asset or any right, title or interest in any
asset (other than in the ordinary course of trading) in a
manner which is material in the context of the P&O Princess
Group taken as a whole;
(vi) entered into or varied or announced its intention to enter
into or vary any contract, arrangement or commitment (whether
in respect of capital expenditure or otherwise) which is of a
long-term or unusual nature or involves or could involve an
obligation of a nature or magnitude, and in either case which
is material in the context of the P&O Princess Group taken as
a whole;
(vii) entered into or proposed or announced its intention to enter
into any reconstruction, amalgamation, transaction or
arrangement (otherwise than in the ordinary course of
business) which is material in the context of the P&O Princess
Group taken as a whole;
(viii) taken or proposed any corporate action or had any legal
proceedings instigated or threatened against it for its
winding-up, dissolution or reorganisation or for the
appointment of a receiver, administrator, administrative
receiver, trustee or similar officer of all or any of its
assets and revenues (or any analogous proceedings or
appointment in any overseas jurisdiction);
(ix) been unable, or admitted in writing that it is unable, to pay
its debts or having stopped or suspended (or threatened to
stop or suspend) payment of its debts generally or ceased or
threatened to cease carrying on all or a substantial part of
its business;
(x) entered into or varied or made any offer to enter into or vary
the terms of any service agreement or arrangement with any of
the directors of P&O Princess;
(xi) waived, compromised or settled any claim which is material in
the context of the wider P&O Princess Group; or
20
(xii) entered into any agreement, arrangement or commitment or
passed any resolution with respect to any of the transactions
or events referred to in this paragraph;
13. since 31 December 2000, except as publicly announced by P&O Princess
prior to the date of this Announcement:
(i) there having been no adverse change in the business, assets,
financial or trading position or profits or prospects of any
member of the wider P&O Princess Group which in any such case
is material in the context of the P&O Princess Group taken as
a whole;
(ii) no litigation, arbitration proceedings, prosecution or other
legal proceedings having been instituted, announced or
threatened by or against or remaining outstanding against any
member of the wider P&O Princess Group and no enquiry or
investigation by or complaint or reference to any Relevant
Authority against or in respect of any member of the wider P&O
Princess Group having been threatened, announced or instituted
or remaining outstanding which in any such case could have a
material affect on that member of the P&O Princess Group;
14. Carnival not having discovered that:
(i) the financial, business or other information concerning the
wider P&O Princess Group as contained in the information
publicly announced or disclosed at any time by or on behalf of
any member of the wider P&O Princess Group either contains a
material misrepresentation of fact or omits to state a fact
necessary to make the information contained therein not
materially misleading; or
(ii) any member of the wider P&O Princess Group is subject to any
liability, contingent or otherwise, which is not disclosed in
the P&O Princess Listing Particulars dated 26 September 2000
or in the Report and Accounts dated 31 December 2000 or in the
interim report for the six months to 26 July 2001 or otherwise
publicly announced by P&O Princess prior to the date of this
announcement and which is material in the context of the P&O
Princess Group taken as a whole;
15. Carnival not having discovered that, save as publicly announced prior to
the date of this Announcement:
(i) any past or present member of the wider P&O Princess Group has
not complied with all applicable legislation or regulations of
any jurisdiction or any notice or requirement of any Relevant
Authority with regard to the storage, disposal, discharge,
spillage, leak or emission of any waste or hazardous substance
or any substance likely to impair the environment or harm
human health which non-compliance would be likely to give rise
to any liability (whether actual or contingent) on the part of
any member of the wider P&O Princess Group;
(ii) there has been a disposal, spillage, emission, discharge or
leak of waste or hazardous substance or any substance likely
to impair the environment or harm human health on, or from,
any land or other asset now or previously owned, occupied or
made use of by any past or present member of the wider P&O
Princess Group, or which any such member may now or previously
have had an interest, would be likely to give rise to any
liability (whether actual or contingent) on the part of any
member of the wider P&O Princess Group;
(iii) there is or is likely to be any obligation or liability
(whether actual or contingent) to make good, repair, reinstate
or clean up any property now or previously owned, occupied or
made use of by any past or present member of the wider P&O
Princess Group or in which any such member may now or
previously have had an interest under any environmental
legislation or regulation or notice, circular or order of any
Relevant Authority in any jurisdiction; or
21
(iv) circumstances exist whereby a person or class of persons would
be likely to have any claim or claims in respect of any
product or process of manufacture, or materials used therein,
now or previously manufactured, sold or carried out by any
past or present member of the wider P&O Princess Group which
claim or claims would be likely to affect adversely any member
of the wider P&O Princess Group.
Carnival reserves the right to waive, in whole or in part, all or any of
Conditions 6 to 15 inclusive. Carnival also reserves the right, subject to the
consent of the Panel, to extend the time allowed under the Code for satisfaction
of Condition 1. If Carnival is required by the Panel to make an offer for P&O
Princess Shares under the provisions of Rule 9 of the Code, Carnival may make
such alterations to the above conditions, including Condition 1 above, as are
necessary to comply with the provisions of that Rule.
The Preference Offer and the Subscriber Share Offer are conditional on the Offer
becoming wholly unconditional.
CERTAIN FURTHER TERMS OF THE OFFER
The Offer will lapse unless otherwise agreed with the Panel if the European
Commission either initiates proceedings under Article 6(1)(c) of the Merger
Regulation or makes referral to a competent authority of the United Kingdom
under Article 9(1) of the Merger Regulation and there is a subsequent reference
to the Competition Commission, before in each case the later of the first
closing date of the Offer and the time and date at which the Offer becomes or is
declared unconditional as to acceptances. If the Offer so lapses, the Offer will
cease to be capable of further acceptance and accepting P&O Princess
Shareholders and Carnival will cease to be bound by acceptances submitted before
the time when the Offer lapses.
Unless Carnival determines otherwise, the Offer will not be made, directly or
indirectly, in or into, Australia, Japan or Canada and the Offer will not be
capable of being accepted from within Australia, Japan or Canada. Accordingly,
copies of this Announcement are not being, and must not be, mailed or otherwise
forwarded, distributed or sent in, into or from Australia, Japan or Canada.
22
APPENDIX III
DEFINITIONS
"Announcement" this announcement
"Australia" the Commonwealth of Australia, its
territories and possessions and all areas
subject to its jurisdiction and any
political subdivision thereof
"Break Fee" the Break Fee between P&O Princess and Royal
Caribbean described by the DLC Announcement
"Canada" Canada, its provinces and territories and
all areas subject to its jurisdiction or any
political subdivision thereof
"Carnival" Carnival Corporation
"Carnival Board" the board of Directors of Carnival
"Carnival Group" Carnival, its subsidiaries and its
subsidiary undertakings
"Carnival Shares" shares of common stock of Carnival of $0.01
each
"Code" or "City Code" or
"Takeover Code" the City Code on Takeovers and Mergers
"Conditions" the conditions set out in Appendix II of
this Announcement
"Companies Act" the Companies Act 1985, as amended
"DLC" dual listed company
"DLC Announcement" the announcement by P&O Princess and Royal
Caribbean of the Royal Caribbean Proposal on
20 November 2001
"Enlarged Carnival Group" the Carnival Group as enlarged on successful
completion of the Offer
"Form of Acceptance" the form of acceptance and authority for use
in connection with the Offer
"Japan" Japan, its cities, prefectures, territories
and possessions
"Joint Venture" the Joint Venture between P&O Princess and
Royal Caribbean described in the DLC
Announcement
"Listing Rules" The Listing Rules issued by the United
Kingdom Listing Authority
"London Stock Exchange" London Stock Exchange plc
"London Stock Exchange Admission
Standards" the rules issued by the London Stock
Exchange in relation to the admission to
trading of, and continuing requirements
for, securities admitted to the Official
List
"Merrill Lynch" Merrill Lynch International
"Mix and Match Election" the mix and match election as described in
this Announcement
"New Carnival Shares" Carnival Shares to be issued in connection
with the Offer
"New York Stock Exchange" the New York Stock Exchange, Inc.
"Offer" the Offer for the P&O Princess Shares to be
made by UBS Warburg and Merrill Lynch on
behalf of Carnival once the Pre-conditions
have been satisfied or waived, including, as
appropriate, the offer to the holders of the
P&O Princess ADRs in respect of the P&O
Princess ADSs title to which is evidenced by
such P&O Princess ADRs, on the terms and
conditions set out in this Announcement and
to be set out in the Offer Document
including, where the context so requires,
any subsequent revision, variation,
extension or renewal of the Offer
"Offer Document" the document to be sent on behalf
of Carnival to P&O Princess Shareholders
once the Pre-conditions have been satisfied
or waived, containing and setting out the
full terms and conditions of the Offer
"Official List" the list maintained by the of the
United Kingdom Listing Authority pursuant to
Part VI of the Financial Services and
Markets Act 2000
"Panel" the Panel on Takeovers and Mergers
"P&O" The Peninsular & Oriental Steam Navigation
Company
"P&O Princess" P&O Princess Cruises plc
23
"P&O Princess ADRs" American Depositary Receipts evidencing
title to one or more ADSs
"P&O Princess ADSs" American Depositary Shares representing four
underlying P&O Princess Share
"P&O Princess Group" P&O Princess, its subsidiaries and its
subsidiary undertakings
"P&O Princess Preference Shares" the 49,998 L1 redeemable preference shares
in issue in P&O Princess
"P&O Princess Shareholders" Holders of the P&O Princess Shares
"P&O Princess Employee Share
Incentive Plans" The P&O Princess Deferred Bonus and
Co-investment Matching Plan, and the P&O
Princess Executive Share Option Plan
"P&O Princess Shares" the existing unconditionally allotted or
issued and fully paid ordinary shares of
US$0.50 each in the capital of P&O Princess
and any further such shares which are
unconditionally allotted or issued and fully
paid before the date on which the Offer
closes (or such earlier date(s) as Carnival
may, subject to the Code, determine),
including any such shares so unconditionally
allotted or issued pursuant to the exercise
of options granted under the P&O Princess
Employee Share Incentive Plans
"P&O Princess Subscriber Shares" the two issued subscriber shares of L1 each
in P&O Princess
"Pre-conditions" the pre-conditions to the posting of the
Offer Document and related Form of
Acceptance and "Pre-condition" means any of
them
"Preference Offer" the offer for the P&O Princess Preference
Shares to be made by UBS Warburg and Merrill
Lynch on behalf of Carnival once the
Pre-conditions have been satisfied or waived
on the terms and conditions set out in this
Announcement and to be set out in the Offer
Document including, where the context so
requires, any subsequent revision,
variation, extension or renewal of such
Preference Offer
"Royal Caribbean" Royal Caribbean Ltd
"Royal Caribbean Proposal" the proposed transaction between P&O
Princess and Royal Caribbean described in
the DLC Announcement
"Royal Caribbean Shareholders" holders of shares in Royal Caribbean
"subsidiary", "subsidiary
undertaking", "associated
undertaking" and "undertaking" shall be construed in accordance with the
Companies Act (but for this purpose ignoring
paragraph 20(1)(b) of Schedule 4A of the
Companies Act)
"Subscriber Offer" the offer for the P&O Princess Subscriber
Shares to be made by UBS Warburg and Merrill
Lynch on behalf of Carnival once the
Pre-conditions have been satisfied or waived
on the terms and conditions set out in this
Announcement and to be set out in the Offer
Document including, where the context so
requires, any subsequent revision,
variation, extension or renewal of such
Subscriber Offer
"UBS Warburg" UBS AG, acting through its business group
UBS Warburg or, where appropriate, its
subsidiary, UBS Warburg Ltd.
"UK Listing Authority" the Financial Services Authority in its
capacity as the competent authority for the
purposes of the Part VI of the Financial
Services and Markets Act 2000
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland
"US" or "United States" the United States of America, its
territories and possessions, and States of
the United States of America and the
District of Columbia and all other areas
subject to the jurisdiction of the United
States
"wider Carnival Group" Carnival and any of its subsidiary
undertakings or any associated undertaking
or company of which 20 per cent. or more of
the voting capital is held by the Carnival
Group or any partnership, joint venture,
firm or company in which any member of the
Carnival Group may be interested
"wider P&O Princess Group" P&O Princess and any of its subsidiary
undertakings or any associated undertaking
or company of which 20 per cent. or more of
the voting capital is held by the P&O
Princess Group or any partnership, joint
venture, firm or company in which any member
of the P&O Princess Group may be interested
"L" or "pounds sterling" or
"pence" or "p" the lawful currency of the United Kingdom
"$" or "US dollars" or "cents" the lawful currency of the United States of
America
24
APPENDIX IV
SOURCES OF INFORMATION
GENERAL
Unless otherwise stated: (i) information relating to Carnival has been extracted
from the relevant published audited SEC filings of Carnival (ii) information
relating to P&O Princess has been extracted from the relevant financial reports
and accounts of P&O Princess (iii) information relating to Royal Caribbean has
been extracted from the relevant SEC filings of Royal Caribbean and (iv)
information relating to the Royal Caribbean Proposal is based upon the
information contained in the DLC Announcement.
SUMMARY
Share prices for P&O Princess are taken from Bloomberg.
The share price for Carnival on 14 December 2001 is taken from Bloomberg.
The $1:L0.689 exchange rate is as published in the Financial Times on 15
December 2001.
References to the value of the Offer for the entire existing share capital of
P&O Princess are based on the 692,588,003 50 cent ordinary shares in issue (by
reference to the P&O Princess audited report and accounts for the financial year
ended 31 December 2000).
REASONS FOR THE OFFER
In the table on page 9, the P&O Princess earnings contribution pre synergies is
calculated as P&O Princess's net income divided by the sum of P&O Princess's net
income and Royal Caribbean's net income for the particular year. In the case of
the Bear Stearns projections, net income has been calculated by multiplying the
stated earnings per share by the stated number of shares outstanding. The source
of each set of projections is a research note published on the date shown in the
table.
In the table on page 10, total shareholder returns to 12 December 2001 are
sourced from Datastream. Datastream calculates the total shareholder return,
assuming gross dividend income is reinvested in additional shares;
EBIT is unadjusted operating profit;
EBITDA is EBIT plus depreciation and amortisation;
EBITDA per available berth day is calculated as EBITDA divided by the number of
available berth days for the same period;
EBIT per available berth day is calculated as EBIT divided by the number of
available berth days for the same period;
The number of available berth days is calculated by dividing passenger cruise
days per year by occupancy rate, both as stated in the SEC filings of Carnival
and Royal Caribbean;
EBITDA margin is calculated as EBITDA divided by the revenues;
ROIC is defined as return on average invested capital and is calculated by
dividing EBIT, taxed at the effective tax rate, by the average opening and
closing total debt plus shareholder equity plus minority interests plus
preferred stock balances. Total debt is the sum of long term debt and current
portion of long term debt;
Net debt at year end/EBITDA is calculated by dividing the net debt at the end of
each financial year by the EBITDA for that financial year. Net debt is total
debt less cash and cash equivalents; and
EBITDA/cash interest expense is calculated by dividing EBITDA by the sum of net
interest expense and capitalised interest.
25
APPENDIX V
PROPOSAL TO THE BOARD OF P&O PRINCESS
Set out below is the full text of the detailed proposal sent by Carnival to the
board of P&O Princess and their advisors on 13 December 2001;
"
Carnival Corporation
Carnival Place
3655 N.W. 87 Avenue
Miami, Florida 33178-2428
United States
The Board of Directors
P&O Princess Cruises plc
77 New Oxford Street
London WC1A 1PP
United Kingdom
13 December 2001
For the attention of Lord Sterling of Plaistow and Mr Peter Ratcliffe
Dear Sirs
INTRODUCTION
I am writing to set out a proposal by Carnival Corporation ("Carnival") to make
an offer for P&O Princess Cruises plc ("P&O Princess") (the "Offer"). We
strongly believe that our proposal has a clear strategic rationale and is a
compelling investment case for the shareholders of both companies, and is
therefore worthy of detailed and serious consideration by you and your advisors.
Our Offer would give P&O Princess shareholders 200p in cash and 0.1361 Carnival
Shares for each P&O Princess Ordinary Share. Based on yesterday's closing price
of $26.55 per Carnival Share, (1837p, converted at an exchange rate of
$1:L0.692), P&O PRINCESS SHAREHOLDERS WILL RECEIVE CONSIDERATION WITH AN
AGGREGATE VALUE OF 450P FOR EACH P&O PRINCESS ORDINARY SHARE.
We believe that our proposal delivers substantially more value to P&O Princess
shareholders than the proposed dual listed company (the "DLC") transaction with
Royal Caribbean Cruises Ltd (the "Royal Caribbean Proposal"). Unlike the Royal
Caribbean Proposal, which does not offer a premium to P&O Princess shareholders,
our Offer provides P&O Princess shareholders with a significant premium for
their shares. Furthermore, our Offer includes a substantial cash element.
As you know, we have had discussions over recent years with P&O Princess and its
former parent regarding a possible combination of Carnival and P&O Princess.
Most recently, on 24 September 2001, Howard Frank, Vice Chairman and COO of
Carnival, called Peter Ratcliffe to say that Carnival wished to pursue a
combination of the two groups. We have not received a response to this approach.
Against this background, we were surprised to see the announcement of the Royal
Caribbean Proposal, as Carnival has the interest and capability to offer an
attractive proposal to your shareholders and had clearly expressed a strong
interest in a combination with P&O Princess. We have decided that, in the
circumstances, we should write this letter to the board of P&O Princess to seek
to ensure that our proposal receives the attention we believe it deserves.
We ask that, prior to 6pm (UK time) on Sunday, 16 December 2001, you respond
formally to our request for a recommendation of our Offer. To demonstrate our
commitment to progress the Offer as rapidly as possible, my senior colleagues
and I are keen to meet with you at your earliest convenience. I shall be
contacting Lord Sterling and Peter Ratcliffe by telephone, in order to discuss
our proposal with them directly.
26
THE ROYAL CARIBBEAN PROPOSAL
The proposed transaction between P&O Princcess and Royal Carribean is, in our
view, disadvantageous to P&O Princess' shareholders, as the terms of the
transaction fail to recognize a number of substantive issues:
o P&O Princess shareholders do not receive any premium or cash consideration
o P&O Princess shareholders will own 50.7% of the combined entity but, based
on analyst forecasts, P&O Princess is expected to contribute significantly
more than this to the combined entity's net income before synergies. P&O
Princess' contribution, based on publicly available selected analysts'
forecasts where 2003 estimates are available, is as follows:
P&O PRINCESS EARNINGS
CONTRIBUTION PRE SYNERGIES
DATE 2002 2003
- --------------------------------------------------------------------------------
SSSB 29-Nov-01 64.4% 57.7%
Bear Stearns 9-Nov-01, 21-Nov-01 53.0% 57.7%
MSDW 21-Nov-01 59.5% 45.7%
UBSW 5-Dec-01 65.5% 59.6%
P&O PRINCESS' PROPOSED SHARE OF COMBINED EARNINGS 50.7% 50.7%
Accordingly, a disproportionate share of the synergy benefits is expected
to accrue to Royal Caribbean's shareholders, in the form of earnings
enhancement, rather than to P&O Princess' shareholders
o Royal Caribbean is highly geared and currently has a sub-investment grade
rating. The terrorist events of September 11 have had a significant
negative impact on the cruise industry and such an event could happen
again. Given these uncertain times, as well as the significant capital
commitments that Royal Caribbean and P&O Princess have made, prudent
management practice makes it incumbent that a strong and flexible balance
sheet be maintained. P&O Princess' credit rating has already been
downgraded in anticipation of the Royal Caribbean Proposal. Despite this,
the Royal Caribbean Proposal does not compensate P&O Princess' shareholders
for the extra financial risk they would bear if the transaction were to be
consummated
o the most senior management position in the combined group has been awarded
to the Royal Caribbean Chairman and CEO. P&O Princess' return on capital
has been superior to that of Royal Caribbean, which has lagged both
Carnival and P&O Princess. P&O Princess and its shareholders should
consider whether the decision to appoint Royal Caribbean's Chairman and CEO
to the same position in the combined group is in the company's best
interests
o the DLC structure in the Royal Caribbean Proposal may constrain P&O
Princess' ability to raise capital, make acquisitions and engage in other
corporate activity. Furthermore, there can be no assurance that P&O
Princess will not trade at a discount to Royal Caribbean after the DLC
structure has been implemented.
In summary, we believe the Royal Caribbean Proposal will leave P&O Princess
shareholders with an investment in a less attractive entity with greater
financial risk and on terms which give Royal Caribbean a greater proportion of
the ownership of the combined group than is merited by its contribution to the
combined group's net income.
27
THE "POISON PILLS"
We are particularly concerned that certain details of the Royal Caribbean
Proposal, namely the Southern European joint venture (the "Joint Venture") and
the $62.5 million break fee (the "Break Fee"), both entered into without
shareholder approval, appear to have been constructed as "poison pills",
designed to deter or thwart any counterproposal to P&O Princess shareholders.
Carnival has reviewed the publicly available information on the Joint Venture
and Break Fee and makes the following observations:
o no substantive commercial reason has been advanced for the immediate need
to conclude the Joint Venture agreement, with its associated costs on a
change of control, particularly when the Joint Venture itself is not
intended to commence cruise operations until 2003. Indeed, we believe the
Joint Venture company's aims could be achieved solely through the DLC. The
main, if not sole, effect of the Joint Venture is, in our opinion, to make
P&O Princess less attractive and less vulnerable to a third party offeror,
as it seriously disadvantages P&O Princess if there is a change of control
of P&O Princess. This is clearly contrary to the interests of P&O Princess
shareholders
o the Break Fee is significantly in excess of the UK market norm. On 19
November 2001, P&O Princess' market capitalization was approximately $3.1
billion and, therefore, the size of the Break Fee greatly exceeds the
maximum that would have been permitted under the City Code on Takeovers and
Mergers (the "Takeover Code", which is recognized in the UK as best
practice) of 1% or approximately $31 million.
WHY CARNIVAL IS THE BEST PARTNER FOR P&O PRINCESS
The board of Carnival firmly believes that Carnival is the best partner for P&O
Princess. Set out below are a number of key historic measures that compare the
financial and operating performance of Royal Caribbean and Carnival. These data
reinforce our belief that Carnival's management team has a stronger track
record, clearly focused on enhancing shareholder value, which will be critical
in rapidly delivering the synergies a combination should bring.
o Carnival's shareholder returns have consistently outperformed those of
Royal Caribbean
TOTAL SHAREHOLDER RETURNS TO 12 DECEMBER 2001(1) CARNIVAL ROYAL
CARIBBEAN
last 12 months 0.2% (27.9%)
last 5 years 87.5% 38.3%
- ------------------------
(1) Source: Datastream
o Carnival's operational measures are consistently and significantly better
than those of Royal Caribbean
EBITDA PER AVAILABLE BERTH DAY ($) (1) CARNIVAL ROYAL
CARIBBEAN
2000 80 64
1995 - 2000 average 81 57
EBITDA MARGIN (1) CARNIVAL ROYAL
CARIBBEAN
2000 33.6% 27.9%
1995 - 2000 average 34.5% 24.8%
ROIC (1) (2) CARNIVAL ROYAL
CARIBBEAN
2000 12.9% 9.0%
1995 - 2000 average 15.0% 9.6%
- -----------------------
(1) Source: Public filings
(2) ROIC is (taxed EBIT / Average opening and closing total debt plus
equity balances)
o Carnival has significantly greater balance sheet strength and flexibility
than Royal Caribbean
28
NET DEBT AT YEAR END/EBITDA (1) CARNIVAL ROYAL CARIBBEAN
2000 1.7x 4.0x
1995 - 2000 average 1.4x 4.0x
EBITDA CASH INTEREST EXPENSE (1) CARNIVAL ROYAL CARIBBEAN
2000 15.4x 4.0x
1995 - 2000 average 11.6x 3.7x
- -----------------------
(1) Source: Public filings
CREDIT RATINGS CARNIVAL (1) ROYAL CARIBBEAN(2)
Investment grade Non-investment
grade
S&P A BB+
Outlook Negative Negative
Moody's A2 Ba2
Outlook Negative Stable
- -----------------------
(1) Current
(2) Prior to the announcement of the Royal
Caribbean Proposal
Based on Carnival's performance as outlined above, we believe that P&O Princess
shareholders would be better served through a combination with Carnival than
with Royal Caribbean, particularly where such a combination includes a premium
valuation of P&O Princess' business.
BENEFITS OF THE PROPOSED COMBINATION OF CARNIVAL AND P&O PRINCESS
We believe that a combination of Carnival and P&O Princess has a strong
strategic rationale and represents a compelling investment case that,
particularly in the current economic climate, would be well received by the
shareholders of both our companies.
We believe that this proposed combination:
o generates significant synergies to the benefit of both shareholders and
customers. These savings are expected to come from leveraging the best
practice of the two best management teams in the industry to achieve
efficiencies from, inter alia, purchasing, marketing and information
systems, and also from rationalizing support operations in locations served
by both companies. We hope to identify substantial additional benefits when
we are provided with access to P&O Princess' detailed financial and
operational data
o benefits from the financial flexibility of the combined group's strong
balance sheet and cash flow. We believe that the terms of the Offer would
ensure that the proposed combination of Carnival and P&O Princess would
retain a strong financial position with an investment grade rating
o creates a broader and more complementary portfolio of brands operating in
the US and Europe, thereby enhancing the combined group's ability to
attract more customers away from land-based vacations to cruise vacations,
and creates a wider range of vacation choices for our combined customer
base
29
CARNIVAL'S PROPOSAL
OFFER STRUCTURE
Carnival is prepared to make the Offer on the following basis:
FOR EACH P&O PRINCESS SHARE 200P IN CASH AND 0.1361 CARNIVAL SHARES
On the basis of a Carnival Share price of $26.55 (being the price at the close
of business yesterday), and an exchange rate of $1:L0.692, the Offer values each
P&O Princess Ordinary Share at 450p (equivalent to $26.01 per ADR) (consisting
of 200p in cash and 250p in Carnival Shares) and values the entire existing
ordinary share capital of P&O Princess at approximately L3.1 billion. This
represents:
o a premium of 42.0% to the closing middle market price of 317p per P&O
Princess Ordinary Share on 19 November 2001, the last business day prior to
the announcement of the Royal Caribbean Proposal
o a premium of 22.6% to the closing middle market price of 367p per P&O
Princess Ordinary Share on 12 December 2001, the last business day prior to
this letter
o a premium of 13.4% to the highest closing middle market price of 397p per
P&O Princess Ordinary Share at which P&O Princess has traded since its
demerger.
It is Carnival's intention that the cash element of the Offer be provided under
a mix and match structure such that shareholders have an element of choice to
take shares or cash.
Carnival intends to seek a listing for its shares on the London Stock Exchange
to facilitate and encourage the continuing participation by P&O Princess'
shareholders in the combined group.
It is intended that the cash consideration for the Offer amounting to $2.0
billion be financed through existing resources of Carnival and new facilities.
Currently Carnival has cash and undrawn facilities totalling approximately $2.4
billion.
POTENTIAL FOR INCREASED CONSIDERATION
If P&O Princess is able to reduce or eliminate the costs to Carnival of the
poison pills, Carnival is prepared to increase the value of the Offer.
ALTERNATIVE TRANSACTION STRUCTURES
Carnival is prepared to discuss alternative transaction structures with P&O
Princess including, inter alia, a dual listed company. In such a scenario,
Carnival envisages that the economic interests of each party under such a
structure would reflect the valuation of P&O Princess as set out in the proposal
above. Such a structure would enable P&O Princess to retain all of perceived
benefits of the proposed DLC structure with Royal Caribbean whilst allowing P&O
Princess shareholders to benefit from our premium economic proposal and stronger
financial position.
OUTSTANDING ISSUES
Before proceeding with the Offer, we would require the following issues to be
resolved:
(i) Carnival having received all information which was provided
by P&O Princess to Royal Caribbean in connection with the
Royal Caribbean Proposal, as would be supplied if Rule 20.2
of the Takeover Code had applied
(ii) the board of P&O Princess either not convening the EGM for
the approval of the Royal Caribbean Proposal, or, if it is
under an obligation to convene such meeting, recommending
that shareholders vote against the Royal Caribbean Proposal
(iii) appropriate regulatory clearances being obtained in a form
satisfactory to Carnival (see below)
(iv) Carnival being satisfied that the cost to P&O Princess of
terminating the Joint Venture in the event of the Offer
becoming wholly unconditional will not be in excess of $200
million
30
(v) The board of P&O Princess undertaking that in the period
from the date of this letter until the Offer becomes wholly
unconditional, P&O Princess will not declare or pay
dividends in excess of 3 US cents per P&O Princess Ordinary
Share each quarter
(vi) Carnival having arranged funding for the Offer on terms
satisfactory to it.
We would envisage that items (i), (ii), (iv) and (v) would be resolved prior to
announcing the Offer. Carnival is willing to secure the relevant funding prior
to announcement if it is necessary to secure the Board's recommendation. On this
basis, the making of the Offer would be subject only to regulatory approval.
REGULATORY APPROVALS
Our proposal is subject to clearance from the relevant antitrust authorities, in
particular those in the EU and US. We have examined the requirements for
approval and have received advice from our external antitrust advisors that the
likelihood of Carnival receiving a favorable outcome is no less than that of the
Royal Caribbean Proposal.
o We believe, as Royal Caribbean and P&O Princess have stated, that we
compete in a broad vacation market rather than simply a cruise market.
Carnival and Royal Caribbean are similarly situated in that market. Both
companies undertake substantial efforts to attract consumers from other
vacation options. That analysis should result in a view that there are no
significant antitrust issues for either transaction
o in Europe, our proposal would be subject to the centralized EU merger
control process, rather than the independent review of certain EU member
states as we understand is the case for the Royal Caribbean Proposal. We
believe that Carnival's antitrust process would be completed within a
similar timeframe to that of the Royal Caribbean Proposal, and would not
face greater regulatory hurdles than the Royal Caribbean Proposal
o in the US, our proposal would be subject to the Hart-Scott-Rodino process,
which will not differ significantly in timing or substantive issues from
the FTC review of the Royal Caribbean Proposal. In fact, Royal Caribbean
and Carnival's comparable brands are very similar in size and scope, as
shown below:
CARNIVAL BRANDS BERTHS ROYAL CARIBBEAN BRANDS BERTHS
Carnival Cruise Lines 33,246 Royal Caribbean Intl 33,046
HAL 13,348 Celebrity Cruises 14,332
------ ------
46,594 47,378
As a result, whilst we believe that there should be no significant antitrust
issues in the US, if there were to be such issues, they would be substantially
the same for both the Royal Caribbean and Carnival proposals.
31
BOARD, 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 our proposal from a larger operating platform and a business
of greater international size and scope.
Carnival operates its various cruise businesses on a decentralized basis, whilst
optimizing the cost base through shared services. We envisage extending this
approach to the businesses of P&O Princess.
We are prepared to offer members of P&O Princess' senior executive management
important and influential positions in the enlarged group, including as
appropriate, at Carnival board level.
OTHER MATTERS
Neither our interest in P&O Princess nor the contents of this letter may be
disclosed by P&O Princess to any person, other than your professional advisors,
without our prior written consent. Carnival reserves the right to terminate
discussions immediately and without any obligation on its part whatsoever.
This letter is intended only to convey Carnival's interest in a possible
transaction with P&O Princess. For the avoidance of doubt, this letter should
not be construed in any regard as constituting an offer, evincing an intention
to make an offer or otherwise giving rise to legal relations and in particular,
does not constitute a firm intention to make an offer for the purposes of Rule
2.2 of the Takeover Code.
We should like to reiterate our strong interest in acquiring P&O Princess and
our ability to move speedily to an announcement. We believe that our proposal is
significantly more attractive to P&O Princess and its shareholders than the
Royal Caribbean Proposal. We look forward to your response to this letter which
in any event should be received prior to 6pm (UK time) on Sunday, 16 December
2001.
Yours sincerely
M. Arison
Chairman and CEO"
EXHIBIT B
CARNIVAL CORPORATION ANNOUNCES PRE-CONDITIONAL OFFER
----------------------------------------------------
FOR P&O PRINCESS CRUISES PLC
----------------------------
LONDON (12/16/01) - Carnival Corporation (NYSE:CCL) today announced the terms of
a pre-conditional offer to acquire all of the outstanding shares of P&O Princess
Cruises PLC (NYSE: POC).
Under the terms of the pre-conditional offer, P&O Princess Cruises' shareholders
would receive 200 pence in cash and 0.1361 Carnival shares for each P&O Princess
Cruises share. Based on the New York Stock Exchange closing price of a Carnival
share of $27.30 on Dec. 14, 2001, the last business day prior to the date of the
announcement of the offer, the value of the offer is approximately 456 pence per
share, a premium of 44 percent to the closing middle market price of 317 pence
per P&O Princess Cruises share on November 19, 2001, the last business day prior
to the announcement of P&O Princess Cruises' proposed transaction with Royal
Caribbean Ltd. It represents a premium of 27 percent to the closing middle
market price of 360 pence per P&O Princess Cruises share on Dec. 14, 2001, the
last business day prior to Carnival's offer announcement.
(more)
1
"We believe that our proposal is in the best interest of P&O Princess Cruises'
shareholders," said Carnival Corporation Chairman and CEO, Micky Arison. "The
proposed combination of Carnival Corporation and P&O Princess Cruises creates a
global vacation and leisure company with an enhanced offering of complementary
brands and greater geographic reach. We are offering P&O Princess Cruises'
shareholders the opportunity to share in the future successes that we believe
the combined management teams will bring to this enlarged group," he explained.
Arison went on to say that Carnival believed that the Royal Caribbean proposal
would leave P&O Princess Cruises' shareholders with an investment in a less
attractive entity with greater financial risk and on terms which give Royal
Caribbean shareholders a greater proportion of the ownership of the combined
group than is merited by its profit contribution to the combined group's net
income.
(more)
2
Carnival has made several approaches to P&O Princess Cruises in the past two
years, most recently on September 24, 2001, less than 9 weeks before the
proposed merger with Royal Caribbean was announced. "We were quite surprised by
the announcement and its terms, particularly the break fee and Southern European
Joint Venture, given that P&O Princess Cruises senior management ignored our
approach although they were acutely aware of our ongoing keen interest in
entering into discussions," Arison said.
If successful, the proposed transaction is expected to be accretive to Carnival
Corporation's earnings per share in the first full financial year after the
combination.*
* THIS STATEMENT SHOULD NOT BE INTERPRETED TO MEAN THAT THE EARNINGS PER
CARNIVAL SHARE FOR THE CURRENT OR FUTURE FINANCIAL YEARS WILL NECESSARILY MATCH
OR EXCEED THE HISTORICAL PUBLISHED EARNINGS PER CARNIVAL SHARE.
On Thursday, Dec. 13, 2001 Carnival Corporation submitted a proposal letter
outlining a combination with P&O Princess Cruises to the P&O Princess Cruises'
board. A copy of the proposal letter follows this release. Late today, P&O
Princess Cruises advised Carnival that it was rejecting the proposal. Carnival
has therefore decided to communicate the offer directly to P&O Princess Cruises
shareholders. The summary of the pre-conditional announcement follows this
release; a full copy of the pre-conditional announcement and slides for the
analyst presentation is posted on Carnival's website under www.carnivalcorp.com.
The pre-conditional offer is subject to the pre-conditions attached and to
certain customary closing conditions and other regulations.
There will be a UK and European analysts' presentation at 9.00 a.m. (GMT)/4.00
a.m.(EST) and a press briefing at 1.00 p.m. on Monday 17 December 2001. The
venue for both will be the offices of UBS Warburg, 1 Finsbury Avenue, London,
EC2M 2PP.
3
There will be a dial-in conference call facility for the 9.00 a.m. (GMT)
analysts' presentation. The number for this facility is +44 (0) 20 8781 0596;
password: Carnival.
There will be a US and European analyst conference call at 3.00 p.m. (GMT) /
10.00 a.m. (EST). The number for this facility is +1 800 553 2165; password:
Carnival
Unless otherwise determined by Carnival and permitted by applicable law and
regulation, the Offer will not be made, directly or indirectly, in or into, or
by use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or of any facility of a national securities exchange of, nor will it be made
in or into Australia, Canada or Japan and the Offer will not be capable of
acceptance by any such use, means, instrumentality or facilities. Accordingly,
unless otherwise determined by Carnival and permitted by applicable law and
regulation, copies of this Announcement and any other documents related to the
Offer are not being, and must not be, mailed or otherwise forwarded, distributed
or sent in or into Australia, Canada or Japan and persons receiving such
documents (including custodians, nominees and trustees) must not distribute or
send them in, into or from such jurisdictions.
The availability of the Offer to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdictions in which they are located.
Persons who are not resident in the United Kingdom should inform themselves of,
and observe, any applicable requirements.
The Offer will be made in the United States by Carnival. References in this
Announcement to the Offer being made by Merrill Lynch or UBS Warburg should be
read accordingly.
Merrill Lynch International and UBS Warburg ., a business group of UBS AG, are
acting as joint financial advisors and joint corporate brokers exclusively to
Carnival and no-one else in connection with the Offer and will not be
responsible to anyone other than Carnival for providing the protections afforded
to clients respectively of Merrill Lynch International and UBS Warburg as the
case may be or for providing advice in relation to the Offer.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Carnival has tried, wherever possible, to identify such statements by using
words such as "anticipate," "assume," "believe," "expect," "intend," "plan" and
words and terms of similar substance in connection with any discussion of future
operating or financial performance. These forward-looking statements, including
those which may impact the forecasting of Carnival's net revenue yields, booking
levels, price, occupancy or business prospects, involve known and unknown risks,
uncertainties and other factors, which may cause Carnival's actual results,
performances or achievements to be materially different from any future results,
performances or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions which may impact levels of disposable income of
consumers and the net revenue yields for Carnival's cruise products; consumer
demand for cruises and other vacation options; other vacation industry
competition; effects on consumer demand of armed conflicts, political
instability, terrorism, the availability of air service and adverse media
publicity; increases in cruise industry and vacation industry capacity;
continued availability of attractive port destinations; changes in tax laws and
regulations; Carnival's ability to implement its shipbuilding program and to
continue to expand its business outside the North American market; Carnival's
ability to attract and retain shipboard crew; changes in foreign currency rates,
security expenses, food, fuel, insurance and commodity prices and interest
rates; delivery of new ships on schedule and at the contracted prices; weather
patterns; unscheduled ship repairs and dry-docking; incidents involving cruise
ships; impact of pending or threatened litigation; and changes in laws and
regulations applicable to Carnival.
Carnival cautions the reader that these risks may not be exhaustive. Carnival
operates in a continually changing business environment, and new risks emerge
from time to time. Carnival cannot predict such risks nor can it assess the
impact, if any, of such risks on its business or the extent to which any risk,
or combination of risks may cause actual results to differ from those projected
in any forward-looking statements. Accordingly, forward-looking statements
should not be relied upon as a prediction of actual results. Carnival undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
CARNIVAL PLANS TO FILE A REGISTRATION STATEMENT ON FORM S-4 AND A STATEMENT ON
SCHEDULE TO WITH THE US SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH
THE OFFER. THE FORM S-4 WILL CONTAIN A PROSPECTUS AND OTHER DOCUMENTS RELATING
TO THE OFFER. CARNIVAL PLANS TO MAIL THE PROSPECTUS CONTAINED IN THE FORM S-4 TO
SHAREHOLDERS OF PORT WHEN THE FORM S-4 IS FILED WITH THE SEC. THE FORM S-4, THE
PROSPECTUS AND THE SCHEDULE TO WILL CONTAIN IMPORTANT INFORMATION ABOUT
CARNIVAL, PORT, THE OFFER AND RELATED MATTERS. INVESTORS AND STOCKHOLDERS SHOULD
READ THE FORM S-4, THE PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS FILED
WITH THE SEC IN CONNECTION WITH THE OFFER CAREFULLY BEFORE THEY MAKE ANY
DECISION WITH RESPECT TO THE OFFER. THE FORM S-4, THE PROSPECTUS, THE SCHEDULE
TO AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE OFFER WILL
BE AVAILABLE WHEN FILED FREE OF CHARGE AT THE SEC'S WEB SITE, AT WWW.SEC.GOV. IN
ADDITION, THE PROSPECTUS AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN
CONNECTION WITH THE OFFER WILL BE MADE AVAILABLE TO INVESTORS FREE OF CHARGE BY
WRITING TO TIM GALLAGHER AT CARNIVAL CORPORATION, CARNIVAL PLACE, 3655 N.W. 87
AVENUE, MIAMI, FLORIDA, 33178-2428, US.
4
IN ADDITION TO THE FORM S-4, PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS
FILED WITH THE SEC IN CONNECTION WITH THE OFFER, CARNIVAL IS OBLIGATED TO FILE
ANNUAL, QUARTERLY AND SPECIAL REPORTS, PROXY STATEMENTS AND OTHER INFORMATION
WITH THE SEC. PERSONS MAY READ AND COPY ANY REPORTS, STATEMENTS AND OTHER
INFORMATION FILED WITH THE SEC AT THE SEC'S PUBLIC REFERENCE ROOM AT 450 FIFTH
STREET, N.W., WASHINGTON, D.C. 20549. PLEASE CALL THE SEC AT 1-800-SEC-0330 FOR
FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOM. FILINGS WITH THE SEC ALSO ARE
AVAILABLE TO THE PUBLIC FROM COMMERCIAL DOCUMENT-RETRIEVAL SERVICES AND AT THE
WEB SITE MAINTAINED BY THE SEC AT WWW.SEC.GOV.
5
PROPOSAL TO THE BOARD OF P&O PRINCESS
Set out below is the full text of the detailed proposal sent by Carnival to the
board of P&O Princess and their advisors on 13 December 2001;
"
Carnival Corporation
Carnival Place
3655 N.W. 87 Avenue
Miami, Florida 33178-2428
United States
The Board of Directors
P&O Princess Cruises plc
77 New Oxford Street
London WC1A 1PP
United Kingdom
13 December 2001
For the attention of Lord Sterling of Plaistow and Mr Peter Ratcliffe
Dear Sirs
INTRODUCTION
I am writing to set out a proposal by Carnival Corporation ("Carnival") to make
an offer for P&O Princess Cruises plc ("P&O Princess") (the "Offer"). We
strongly believe that our proposal has a clear strategic rationale and is a
compelling investment case for the shareholders of both companies, and is
therefore worthy of detailed and serious consideration by you and your advisors.
Our Offer would give P&O Princess shareholders 200p in cash and 0.1361 Carnival
Shares for each P&O Princess Ordinary Share. Based on yesterday's closing price
of $26.55 per Carnival Share, (1837p, converted at an exchange rate of
$1:(pound)0.692), P&O PRINCESS SHAREHOLDERS WILL RECEIVE CONSIDERATION WITH AN
AGGREGATE VALUE OF 450P FOR EACH P&O PRINCESS ORDINARY SHARE.
We believe that our proposal delivers substantially more value to P&O Princess
shareholders than the proposed dual listed company (the "DLC") transaction with
Royal Caribbean Cruises Ltd (the "Royal Caribbean Proposal"). Unlike the Royal
Caribbean Proposal, which does not offer a premium to P&O Princess shareholders,
our Offer provides P&O Princess shareholders with a significant premium for
their shares. Furthermore, our Offer includes a substantial cash element.
As you know, we have had discussions over recent years with P&O Princess and its
former parent regarding a possible combination of Carnival and P&O Princess.
Most recently, on 24 September 2001, Howard Frank, Vice Chairman and COO of
Carnival, called Peter Ratcliffe to say that Carnival wished to pursue a
combination of the two groups. We have not received a response to this approach.
Against this background, we were surprised to see the announcement of the Royal
Caribbean Proposal, as Carnival has the interest and capability to offer an
attractive proposal to your shareholders and had clearly expressed a strong
interest in a combination with P&O Princess. We have decided that, in the
circumstances, we should write this letter to the board of P&O Princess to seek
to ensure that our proposal receives the attention we believe it deserves.
We ask that, prior to 6pm (UK time) on Sunday, 16 December 2001, you respond
formally to our request for a recommendation of our Offer. To demonstrate our
commitment to progress the Offer as rapidly as possible, my senior colleagues
and I are keen to meet with you at your earliest convenience. I shall be
contacting Lord Sterling and Peter Ratcliffe by telephone, in order to discuss
our proposal with them directly.
6
THE ROYAL CARIBBEAN PROPOSAL P&O PRINCESS EARNINGS
The proposed transaction between P&O PrincCONTRIBUTIONlPRErSYNERGIES, in our
view, disadvantageous to P&O Princess' shareholders, as the terms of the
transaction fail to recognize a number of substantive issues:
o P&O Princess shareholders do not receive any premium or cash
consideration
o P&O Princess shareholders will own 50.7% of the combined entity but,
based on analyst forecasts, P&O Princess is expected to contribute
significantly more than this to the combined entity's net income before
synergies. P&O Princess' contribution, based on publicly available
selected analysts' forecasts where 2003 estimates are available, is as
follows:
P&O Princess earnings
contribution pre synergies
DATE 2002 2003
------------------------------------------------------------------------------------
SSSB 29-Nov-01 64.4% 57.7%
Bear Stearns 9-Nov-01, 21-Nov-01 53.0% 57.7%
MSDW 21-Nov-01 59.5% 45.7%
UBSW 5-Dec-01 65.5% 59.6%
P&O PRINCESS' PROPOSED SHARE OF COMBINED EARNINGS 50.7% 50.7%
o Accordingly, a disproportionate share of the synergy benefits is
expected to accrue to Royal Caribbean's shareholders, in the form of
earnings enhancement, rather than to P&O Princess' shareholders
o Royal Caribbean is highly geared and currently has a sub-investment
grade rating. The terrorist events of September 11 have had a
significant negative impact on the cruise industry and such an event
could happen again. Given these uncertain times, as well as the
significant capital commitments that Royal Caribbean and P&O Princess
have made, prudent management practice makes it incumbent that a strong
and flexible balance sheet be maintained. P&O Princess' credit rating
has already been downgraded in anticipation of the Royal Caribbean
Proposal. Despite this, the Royal Caribbean Proposal does not
compensate P&O Princess' shareholders for the extra financial risk they
would bear if the transaction were to be consummated
o the most senior management position in the combined group has been
awarded to the Royal Caribbean Chairman and CEO. P&O Princess' return
on capital has been superior to that of Royal Caribbean, which has
lagged both Carnival and P&O Princess. P&O Princess and its
shareholders should consider whether the decision to appoint Royal
Caribbean's Chairman and CEO to the same position in the combined group
is in the company's best interests
o the DLC structure in the Royal Caribbean Proposal may constrain P&O
Princess' ability to raise capital, make acquisitions and engage in
other corporate activity. Furthermore, there can be no assurance that
P&O Princess will not trade at a discount to Royal Caribbean after the
DLC structure has been implemented.
In summary, we believe the Royal Caribbean Proposal will leave P&O Princess
shareholders with an investment in a less attractive entity with greater
financial risk and on terms which give Royal Caribbean a greater proportion of
the ownership of the combined group than is merited by its contribution to the
combined group's net income.
7
THE "POISON PILLS"
We are particularly concerned that certain details of the Royal Caribbean
Proposal, namely the Southern European joint venture (the "Joint Venture") and
the $62.5 million break fee (the "Break Fee"), both entered into without
shareholder approval, appear to have been constructed as "poison pills",
designed to deter or thwart any counterproposal to P&O Princess shareholders.
Carnival has reviewed the publicly available information on the Joint Venture
and Break Fee and makes the following observations:
o no substantive commercial reason has been advanced for the immediate
need to conclude the Joint Venture agreement, with its associated costs
on a change of control, particularly when the Joint Venture itself is
not intended to commence cruise operations until 2003. Indeed, we
believe the Joint Venture company's aims could be achieved solely
through the DLC. The main, if not sole, effect of the Joint Venture is,
in our opinion, to make P&O Princess less attractive and less
vulnerable to a third party offeror, as it seriously disadvantages P&O
Princess if there is a change of control of P&O Princess. This is
clearly contrary to the interests of P&O Princess shareholders
o the Break Fee is significantly in excess of the UK market norm. On 19
November 2001, P&O Princess' market capitalization was approximately
$3.1 billion and, therefore, the size of the Break Fee greatly exceeds
the maximum that would have been permitted under the City Code on
Takeovers and Mergers (the "Takeover Code", which is recognized in the
UK as best practice) of 1% or approximately $31 million.
WHY CARNIVAL IS THE BEST PARTNER FOR P&O PRINCESS
The board of Carnival firmly believes that Carnival is the best partner for P&O
Princess. Set out below are a number of key historic measures that compare the
financial and operating performance of Royal Caribbean and Carnival. These data
reinforce our belief that Carnival's management team has a stronger track
record, clearly focused on enhancing shareholder value, which will be critical
in rapidly delivering the synergies a combination should bring.
o Carnival's shareholder returns have consistently outperformed those of
Royal Caribbean
TOTAL SHAREHOLDER RETURNS TO 12 DECEMBER 2001(1) CARNIVAL ROYAL
CARIBBEAN
last 12 months 0.2% (27.9%)
last 5 years 87.5% 38.3%
(1) Source: Datastream
o Carnival's operational measures are consistently and significantly
better than those of Royal Caribbean
EBITDA PER AVAILABLE BERTH DAY ($) (1) CARNIVAL ROYAL
CARIBBEAN
2000 80 64
1995 - 2000 average 81 57
EBITDA MARGIN (1) CARNIVAL ROYAL
CARIBBEAN
2000 33.6% 27.9%
1995 - 2000 average 34.5% 24.8%
ROIC (1) (2) CARNIVAL ROYAL
CARIBBEAN
2000 12.9% 9.0%
1995 - 2000 average 15.0% 9.6%
(1) Source: Public filings
(2) ROIC is (taxed EBIT / Average opening and closing total debt plus
equity balances)
o Carnival has significantly greater balance sheet strength and
flexibility than Royal Caribbean
8
NET DEBT AT YEAR END/EBITDA (1) CARNIVAL ROYAL CARIBBEAN
2000 1.7x 4.0x
1995 - 2000 average 1.4x 4.0x
EBITDA CASH INTEREST EXPENSE (1) CARNIVAL ROYAL CARIBBEAN
2000 15.4x 4.0x
1995 - 2000 average 11.6x 3.7x
(1) Source: Public filings
CREDIT RATINGS CARNIVAL (1) ROYAL CARIBBEAN(2)
Investment grade Non-investment
grade
S&P A BB+
Outlook Negative Negative
Moody's A2 Ba2
Outlook Negative Stable
(1) Current
(2) Prior to the announcement of the Royal Caribbean Proposal
Based on Carnival's performance as outlined above, we believe that P&O Princess
shareholders would be better served through a combination with Carnival than
with Royal Caribbean, particularly where such a combination includes a premium
valuation of P&O Princess' business.
BENEFITS OF THE PROPOSED COMBINATION OF CARNIVAL AND P&O PRINCESS We believe
that a combination of Carnival and P&O Princess has a strong strategic rationale
and represents a compelling investment case that, particularly in the current
economic climate, would be well received by the shareholders of both our
companies.
We believe that this proposed combination:
o generates significant synergies to the benefit of both shareholders and
customers. These savings are expected to come from leveraging the best
practice of the two best management teams in the industry to achieve
efficiencies from, inter alia, purchasing, marketing and information
systems, and also from rationalizing support operations in locations
served by both companies. We hope to identify substantial additional
benefits when we are provided with access to P&O Princess' detailed
financial and operational data
o benefits from the financial flexibility of the combined group's strong
balance sheet and cash flow. We believe that the terms of the Offer
would ensure that the proposed combination of Carnival and P&O Princess
would retain a strong financial position with an investment grade
rating
o creates a broader and more complementary portfolio of brands operating
in the US and Europe, thereby enhancing the combined group's ability to
attract more customers away from land-based vacations to cruise
vacations, and creates a wider range of vacation choices for our
combined customer base
9
CARNIVAL'S PROPOSAL
OFFER STRUCTURE
CARNIVAL IS PREPARED TO MAKE THE OFFER ON THE FOLLOWING BASIS:
FOR EACH P&O PRINCESS SHARE 200P IN CASH AND 0.1361 CARNIVAL SHARES
On the basis of a Carnival Share price of $26.55 (being the price at the close
of business yesterday), and an exchange rate of $1:(pound)0.692, the Offer
values each P&O Princess Ordinary Share at 450p (equivalent to $26.01 per ADR)
(consisting of 200p in cash and 250p in Carnival Shares) and values the entire
existing ordinary share capital of P&O Princess at approximately (pound)3.1
billion. This represents:
o a premium of 42.0% to the closing middle market price of 317p per P&O
Princess Ordinary Share on 19 November 2001, the last business day prior to
the announcement of the Royal Caribbean Proposal
o a premium of 22.6% to the closing middle market price of 367p per P&O
Princess Ordinary Share on 12 December 2001, the last business day prior to
this letter
o a premium of 13.4% to the highest closing middle market price of 397p per
P&O Princess Ordinary Share at which P&O Princess has traded since its
demerger.
It is Carnival's intention that the cash element of the Offer be provided under
a mix and match structure such that shareholders have an element of choice to
take shares or cash.
Carnival intends to seek a listing for its shares on the London Stock Exchange
to facilitate and encourage the continuing participation by P&O Princess'
shareholders in the combined group.
It is intended that the cash consideration for the Offer amounting to $2.0
billion be financed through existing resources of Carnival and new facilities.
Currently Carnival has cash and undrawn facilities totalling approximately $2.4
billion.
POTENTIAL FOR INCREASED CONSIDERATION
If P&O Princess is able to reduce or eliminate the costs to Carnival of the
poison pills, Carnival is prepared to increase the value of the Offer.
ALTERNATIVE TRANSACTION STRUCTURES
Carnival is prepared to discuss alternative transaction structures with P&O
Princess including, inter alia, a dual listed company. In such a scenario,
Carnival envisages that the economic interests of each party under such a
structure would reflect the valuation of P&O Princess as set out in the proposal
above. Such a structure would enable P&O Princess to retain all of perceived
benefits of the proposed DLC structure with Royal Caribbean whilst allowing P&O
Princess shareholders to benefit from our premium economic proposal and stronger
financial position.
OUTSTANDING ISSUES
Before proceeding with the Offer, we would require the following issues to be
resolved:
(i) Carnival having received all information which was provided by
P&O Princess to Royal Caribbean in connection with the Royal
Caribbean Proposal, as would be supplied if Rule 20.2 of the
Takeover Code had applied
(ii) the board of P&O Princess either not convening the EGM for the
approval of the Royal Caribbean Proposal, or, if it is under
an obligation to convene such meeting, recommending that
shareholders vote against the Royal Caribbean Proposal
(iii) appropriate regulatory clearances being obtained in a form
satisfactory to Carnival (see below)
10
(iv) Carnival being satisfied that the cost to P&O Princess of
terminating the Joint Venture in the event of the Offer
becoming wholly unconditional will not be in excess of $200
million
(v) The board of P&O Princess undertaking that in the period from
the date of this letter until the Offer becomes wholly
unconditional, P&O Princess will not declare or pay dividends
in excess of 3 US cents per P&O Princess Ordinary Share each
quarter
(vi) Carnival having arranged funding for the Offer on terms
satisfactory to it.
We would envisage that items (i), (ii), (iv) and (v) would be resolved prior to
announcing the Offer. Carnival is willing to secure the relevant funding prior
to announcement if it is necessary to secure the Board's recommendation. On this
basis, the making of the Offer would be subject only to regulatory approval.
REGULATORY APPROVALS
Our proposal is subject to clearance from the relevant antitrust authorities, in
particular those in the EU and US. We have examined the requirements for
approval and have received advice from our external antitrust advisors that the
likelihood of Carnival receiving a favorable outcome is no less than that of the
Royal Caribbean Proposal.
o We believe, as Royal Caribbean and P&O Princess have stated, that we
compete in a broad vacation market rather than simply a cruise market.
Carnival and Royal Caribbean are similarly situated in that market. Both
companies undertake substantial efforts to attract consumers from other
vacation options. That analysis should result in a view that there are no
significant antitrust issues for either transaction
o in Europe, our proposal would be subject to the centralized EU merger
control process, rather than the independent review of certain EU member
states as we understand is the case for the Royal Caribbean Proposal. We
believe that Carnival's antitrust process would be completed within a
similar timeframe to that of the Royal Caribbean Proposal, and would not
face greater regulatory hurdles than the Royal Caribbean Proposal
o in the US, our proposal would be subject to the Hart-Scott-Rodino process,
which will not differ significantly in timing or substantive issues from
the FTC review of the Royal Caribbean Proposal. In fact, Royal Caribbean
and Carnival's comparable brands are very similar in size and scope, as
shown below:
CARNIVAL BRANDS BERTHS ROYAL CARIBBEAN BRANDS BERTHS
Carnival Cruise Lines 33,246 Royal Caribbean Intl 33,046
HAL 13,348 Celebrity Cruises 14,332
------ ------
46,594 47,378
As a result, whilst we believe that there should be no significant antitrust
issues in the US, if there were to be such issues, they would be substantially
the same for both the Royal Caribbean and Carnival proposals.
11
BOARD, 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 our proposal from a larger operating platform and a business
of greater international size and scope.
Carnival operates its various cruise businesses on a decentralized basis, whilst
optimizing the cost base through shared services. We envisage extending this
approach to the businesses of P&O Princess.
We are prepared to offer members of P&O Princess' senior executive management
important and influential positions in the enlarged group, including as
appropriate, at Carnival board level.
OTHER MATTERS
Neither our interest in P&O Princess nor the contents of this letter may be
disclosed by P&O Princess to any person, other than your professional advisors,
without our prior written consent. Carnival reserves the right to terminate
discussions immediately and without any obligation on its part whatsoever.
This letter is intended only to convey Carnival's interest in a possible
transaction with P&O Princess. For the avoidance of doubt, this letter should
not be construed in any regard as constituting an offer, evincing an intention
to make an offer or otherwise giving rise to legal relations and in particular,
does not constitute a firm intention to make an offer for the purposes of Rule
2.2 of the Takeover Code.
We should like to reiterate our strong interest in acquiring P&O Princess and
our ability to move speedily to an announcement. We believe that our proposal is
significantly more attractive to P&O Princess and its shareholders than the
Royal Caribbean Proposal. We look forward to your response to this letter which
in any event should be received prior to 6pm (UK time) on Sunday, 16 December
2001.
Yours sincerely
M. Arison
Chairman and CEO"
12
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA OR
JAPAN
CARNIVAL CORPORATION ("CARNIVAL")
-----------------------------------------------------------------
PRE-CONDITIONAL OFFER TO BE MADE BY
MERRILL LYNCH AND UBS WARBURG
FOR P&O PRINCESS CRUISES PLC ("P&O PRINCESS")
SUMMARY
o The board of Carnival today announces the terms of a pre-conditional offer
to acquire the whole of the issued and to be issued share capital of P&O
Princess.
o The Offer comprises 200 pence in cash and 0.1361 Carnival Shares for each
P&O Princess Share with a Mix and Match Election, as described below.
o Based on the New York Stock Exchange closing price of a Carnival Share of
$27.30 on 14 December 2001, the last business day prior to the date of this
Announcement, and an exchange rate of $1:(pound)0.689, the Offer values
each P&O Princess Share at 456 pence and the entire existing share capital
of P&O Princess at approximately (pound)3.2 billion.
o The Offer represents:
- a premium of 44 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; and
- a premium of 27 per cent. to the closing middle market price of 360
pence per P&O Princess Share on 14 December 2001, the last business day
prior to the date of this Announcement.
o If, before the first closing date of the Offer, the board of P&O Princess
is able to achieve a reduction in the cost of the Break Fee and of exiting
the Joint Venture, then Carnival will be prepared to share the savings, net
of costs, with P&O Princess Shareholders.
o The combination of Carnival and P&O Princess will create a global vacation
and leisure company with a strong and flexible financial position. Carnival
believes that the Offer is significantly more attractive to P&O Princess
Shareholders than the Royal Caribbean Proposal.
o Carnival has the strongest operating and financial record among the listed
cruise companies and believes that the adoption of best practice from the
two management teams will generate significant benefits for customers and
shareholders.
o The acquisition of P&O Princess is expected to be earnings enhancing for
Carnival in the first full financial year of ownership.*
* THIS STATEMENT SHOULD NOT BE INTERPRETED TO MEAN THAT THE EARNINGS PER
CARNIVAL SHARE FOR THE CURRENT OR FUTURE FINANCIAL YEARS WILL NECESSARILY MATCH
OR EXCEED THE HISTORICAL PUBLISHED EARNINGS PER CARNIVAL SHARE.
o Carnival has had a number of discussions over recent years with P&O
Princess and its former parent, P&O, regarding a possible combination of
Carnival and P&O Princess. On 24 September 2001, only eight weeks prior to
the announcement of the Royal Caribbean Proposal, Carnival contacted P&O
Princess proposing a combination, but has received no response to this
approach.
o HAVING CONSIDERED ITS OPTIONS FOLLOWING THE ANNOUNCEMENT OF THE ROYAL
CARIBBEAN PROPOSAL ON 20 NOVEMBER 2001, CARNIVAL SUBMITTED A DETAILED
PROPOSAL REGARDING AN OFFER FOR P&O PRINCESS TO THE BOARD OF P&O PRINCESS
ON THURSDAY, 13 DECEMBER 2001. THE PROPOSAL INCLUDED A REQUEST THAT A
RECOMMENDATION BE FORTHCOMING FROM THE BOARD OF P&O PRINCESS FOR THE OFFER.
A COPY OF THIS PROPOSAL IS SET OUT AS APPENDIX V.
13
o As of the publication of this Announcement, neither P&O Princess nor its
advisors have entered into any discussion with Carnival or its advisors
regarding the proposal. The board of P&O Princess has, however, today
written to Carnival rejecting the Offer, stating a belief that the Offer is
not as favourable financially to the P&O Princess Shareholders and would
face greater execution risk than the Royal Caribbean Proposal.
o The posting of the Offer Document is pre-conditional, INTER ALIA, on the
board of P&O Princess either not convening the EGM for the approval of the
Royal Caribbean Proposal, or, if it is under an obligation to convene such
meeting, recommending that shareholders vote against the Royal Caribbean
Proposal.
o The posting of the Offer Document is also pre-conditional on certain
regulatory clearances being obtained. Given the probable regulatory
timetable, the posting of the Offer Document is also pre-conditional on
financing to avoid incurring unnecessary expense. Carnival currently has
cash and existing facilities of approximately $2.4 billion.
o CARNIVAL WILL NOT PROCEED WITH THE OFFER IF THE P&O PRINCESS SHAREHOLDERS
APPROVE THE ROYAL CARIBBEAN PROPOSAL.
REASONS FOR THE OFFER
BENEFITS OF THE PROPOSED COMBINATION OF CARNIVAL AND P&O PRINCESS
o 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 and Europe, the combined group will have an
enhanced ability to attract customers from land-based vacations to cruise
vacations.
o Carnival expects that the proposed combination will generate significant
synergies to the benefit of both shareholders and customers. These savings
are expected to come by sharing the best practices of the two management
teams to achieve efficiencies from, INTER ALIA, purchasing, marketing and
information systems, and also from rationalising support operations in
locations served by both companies.
o 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 Offer will ensure that the proposed combination of
Carnival and P&O Princess would retain a strong financial position with an
investment grade credit rating.
o Carnival believes that P&O Princess Shareholders would be better served
through a combination with Carnival than with Royal Caribbean. The greater
strength of Carnival's management team is evidenced by a comparison of the
financial and operating performance of Royal Caribbean and Carnival:
- Carnival shareholder returns have consistently outperformed those of
Royal Caribbean;
- Carnival's operational measures are consistently and significantly
better than those of Royal Caribbean; and
- Carnival has significantly greater balance sheet strength and
flexibility than Royal Caribbean.
o Carnival believes that its Offer bears no greater regulatory risk than the
Royal Caribbean Proposal. Carnival believes, as Royal Caribbean and P&O
Princess have already stated, that cruise operators compete in a broad
vacation market, rather than simply a cruise market and, accordingly, both
companies undertake substantial efforts to attract consumers from other
vacation options. Carnival believes that Carnival and Royal Caribbean are
similarly situated within the wider vacation market based on all meaningful
comparators. Carnival has examined the requirements for approval and has
received advice from its external antitrust advisors that the likelihood of
Carnival achieving a favourable regulatory outcome in the EU and US is no
less than that of the Royal Caribbean Proposal.
14
THE ROYAL CARIBBEAN PROPOSAL IS DISADVANTAGEOUS TO P&O PRINCESS SHAREHOLDERS
o Under the Royal Caribbean Proposal P&O Princess Shareholders do not receive
any premium or cash consideration.
o Under the Royal Caribbean Proposal P&O Princess Shareholders will own 50.7
per cent. of the combined entity but, based on selected analysts'
forecasts, P&O Princess is expected to contribute significantly more than
this proportion to the combined entity's net income before synergies.
Accordingly, a disproportionate share of the earnings, as well as the
synergy benefits, is expected to accrue to Royal Caribbean Shareholders
rather than to P&O Princess Shareholders.
o Royal Caribbean is highly geared and currently has a sub-investment grade
credit rating. Given the uncertain economic environment, as well as the
significant capital commitments that Royal Caribbean and P&O Princess have
made, Carnival believes that a strong and flexible balance sheet is
essential. P&O Princess's credit rating has already been downgraded in
anticipation of the Royal Caribbean Proposal. Carnival believes that the
Royal Caribbean Proposal does not compensate P&O Princess Shareholders for
the extra financial risk P&O Princess would bear if the transaction were
consummated.
o The most senior management position in the combined group has been awarded
to the Royal Caribbean Chairman and CEO. However, P&O Princess's
operational and financial performance has been superior to that of Royal
Caribbean, which has lagged both Carnival and P&O Princess. Carnival
believes that P&O Princess Shareholders should consider whether the
decision to appoint Royal Caribbean's Chairman and CEO to the most senior
position in the combined group is in their best interests.
o Carnival believes that the complex DLC structure in the Royal Caribbean
Proposal may constrain P&O Princess's ability to raise capital, make
acquisitions and engage in other corporate activity. Furthermore, there can
be no assurance that P&O Princess will not trade at a discount to Royal
Caribbean after the Royal Caribbean Proposal has been implemented.
o Carnival firmly believes that the Joint Venture and the Break Fee, both
entered into without shareholder approval, have the effect of depriving P&O
Princess Shareholders of the full value of their shares. Both agreements
deviate from permitted norms in public UK takeovers and mergers. Carnival
would have been able to offer a higher price to P&O Princess Shareholders
had these "poison pills" not been put in place.
GENERAL
MICKY ARISON, THE CHAIRMAN AND CHIEF EXECUTIVE OF CARNIVAL, SAID:
"WE BELIEVE OUR PROPOSAL IS CLEARLY MORE FAVOURABLE TO P&O PRINCESS SHAREHOLDERS
THAN THE ROYAL CARIBBEAN DEAL. WE ARE OFFERING A SUBSTANTIAL PREMIUM AND WE ARE
A MUCH STRONGER PARTNER FOR P&O PRINCESS, BOTH FINANCIALLY AND OPERATIONALLY."
There will be a UK and European analysts' presentation at 9.00 a.m. (GMT) and a
press briefing at 1.00 p.m. on Monday 17 December 2001. The venue for both will
be the offices of UBS Warburg, 1 Finsbury Avenue, London, EC2M 2PP.
There will be a dial-in conference call facility for the 9.00 a.m. (GMT)
analysts' presentation. The number for this facility is +44 (0) 20 8781 0596;
password: Carnival.
There will be a US and European analyst conference call at 3.00 p.m. (GMT) /
10.00 a.m. (EST). The number for this facility is +1 800 553 2165; password:
Carnival
The presentation slides will also be available on the internet at the following
address: www.carnivalcorp.com.
15
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE FULL TEXT OF THIS
ANNOUNCEMENT WHICH INCLUDES CARNIVAL'S DETAILED PROPOSAL TO THE BOARD OF P&O
PRINCESS (APPENDIX V).
ENQUIRIES:
CARNIVAL Telephone: +44 20 7567 4861
Micky Arison
Howard Frank
CARNIVAL (US CONTACT) Telephone: +1 305 599 2600, Ext: 16000
Tim Gallagher
Jennifer de la Cruz
MERRILL LYNCH Telephone: +44 20 7628 1000
Philip Yates
James Agnew
Stuart Faulkner
UBS WARBURG Telephone: +44 20 7567 8000
Tom Cooper
Alistair Defriez
Philip Ellick
FINANCIAL DYNAMICS Telephone: +44 20 7831 3113
Nic Bennett
Scott Fulton
Unless otherwise determined by Carnival and permitted by applicable law and
regulation, the Offer will not be made, directly or indirectly, in or into, or
by use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or of any facility of a national securities exchange of, nor will it be made
in or into Australia, Canada or Japan and the Offer will not be capable of
acceptance by any such use, means, instrumentality or facilities. Accordingly,
unless otherwise determined by Carnival and permitted by applicable law and
regulation, copies of this Announcement and any other documents related to the
Offer are not being, and must not be, mailed or otherwise forwarded, distributed
or sent in or into Australia, Canada or Japan and persons receiving such
documents (including custodians, nominees and trustees) must not distribute or
send them in, into or from such jurisdictions.
The availability of the Offer to persons not resident in the United Kingdom may
be affected by the laws of the relevant jurisdictions in which they are located.
Persons who are not resident in the United Kingdom should inform themselves of,
and observe, any applicable requirements.
The Offer will be made in the United States by Carnival. References in this
Announcement to the Offer being made by Merrill Lynch or UBS Warburg should be
read accordingly.
Merrill Lynch International and UBS Warburg Ltd., a subsidiary of UBS AG, are
acting as joint financial advisors and joint corporate brokers exclusively to
Carnival and no-one else in connection with the Offer and will not be
responsible to anyone other than Carnival for providing the protections afforded
to clients respectively of Merrill Lynch International and UBS Warburg Ltd. as
the case may be or for providing advice in relation to the Offer.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Carnival has tried, wherever possible, to identify such statements by using
words such as "anticipate," "assume," "believe," "expect," "intend," "plan" and
words and terms of similar substance in connection with any discussion of future
operating or financial performance. These forward-looking statements, including
those which may impact the forecasting of Carnival's net revenue yields, booking
levels, price, occupancy or business prospects, involve known and unknown risks,
uncertainties and other factors, which may cause Carnival's actual results,
performances or achievements to be materially different from any future results,
performances or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions which may impact levels of disposable income of
consumers and the net revenue yields for Carnival's cruise products; consumer
demand for cruises and other vacation options; other vacation industry
competition; effects on consumer demand of armed conflicts, political
instability, terrorism, the availability of air service and adverse media
publicity; increases in cruise industry and vacation industry capacity;
continued availability of attractive port destinations; changes in tax laws and
regulations; Carnival's ability to implement its shipbuilding program and to
continue to expand its business outside the North American market; Carnival's
ability to attract and retain shipboard crew; changes in foreign currency rates,
security expenses, food, fuel, insurance and commodity prices and interest
rates; delivery of new ships on schedule and at the contracted prices; weather
patterns; unscheduled ship repairs and dry-docking; incidents involving cruise
ships; impact of pending or threatened litigation; and changes in laws and
regulations applicable to Carnival.
Carnival cautions the reader that these risks may not be exhaustive. Carnival
operates in a continually changing business environment, and new risks emerge
from time to time. Carnival cannot predict such risks nor can it assess the
impact, if any, of such risks on its business or the extent to which any risk,
or combination of risks may cause actual results to differ from those projected
in any forward-looking statements. Accordingly, forward-
16
looking statements should not be relied upon as a prediction of actual results.
Carnival undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
CARNIVAL PLANS TO FILE A REGISTRATION STATEMENT ON FORM S-4 AND A STATEMENT ON
SCHEDULE TO WITH THE US SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH
THE OFFER. THE FORM S-4 WILL CONTAIN A PROSPECTUS AND OTHER DOCUMENTS RELATING
TO THE OFFER. CARNIVAL PLANS TO MAIL THE PROSPECTUS CONTAINED IN THE FORM S-4 TO
SHAREHOLDERS OF PORT WHEN THE FORM S-4 IS FILED WITH THE SEC. THE FORM S-4, THE
PROSPECTUS AND THE SCHEDULE TO WILL CONTAIN IMPORTANT INFORMATION ABOUT
CARNIVAL, PORT, THE OFFER AND RELATED MATTERS. INVESTORS AND STOCKHOLDERS SHOULD
READ THE FORM S-4, THE PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS FILED
WITH THE SEC IN CONNECTION WITH THE OFFER CAREFULLY BEFORE THEY MAKE ANY
DECISION WITH RESPECT TO THE OFFER. THE FORM S-4, THE PROSPECTUS, THE SCHEDULE
TO AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE OFFER WILL
BE AVAILABLE WHEN FILED FREE OF CHARGE AT THE SEC'S WEB SITE, AT WWW.SEC.GOV. IN
ADDITION, THE PROSPECTUS AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN
CONNECTION WITH THE OFFER WILL BE MADE AVAILABLE TO INVESTORS FREE OF CHARGE BY
WRITING TO TIM GALLAGHER AT CARNIVAL CORPORATION, CARNIVAL PLACE, 3655 N.W. 87
AVENUE, MIAMI, FLORIDA, 33178-2428, US.
IN ADDITION TO THE FORM S-4, PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS
FILED WITH THE SEC IN CONNECTION WITH THE OFFER, CARNIVAL IS OBLIGATED TO FILE
ANNUAL, QUARTERLY AND SPECIAL REPORTS, PROXY STATEMENTS AND OTHER INFORMATION
WITH THE SEC. PERSONS MAY READ AND COPY ANY REPORTS, STATEMENTS AND OTHER
INFORMATION FILED WITH THE SEC AT THE SEC'S PUBLIC REFERENCE ROOM AT 450 FIFTH
STREET, N.W., WASHINGTON, D.C. 20549. PLEASE CALL THE SEC AT 1-800-SEC-0330 FOR
FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOM. FILINGS WITH THE SEC ALSO ARE
AVAILABLE TO THE PUBLIC FROM COMMERCIAL DOCUMENT-RETRIEVAL SERVICES AND AT THE
WEB SITE MAINTAINED BY THE SEC AT WWW.SEC.GOV.
17
19
PRE-CONDITIONS OF THE OFFER
The making of the Offer by the posting of the Offer Document and related Form of
Acceptance will take place following the satisfaction, or to the extent
permitted, waiver by Carnival, of the following Pre-conditions:
1. insofar as the proposed acquisition of P&O Princess by Carnival
constitutes a concentration with a Community dimension within the scope
of Council Regulation (EEC) 4064/89 (as amended) (the "Merger
Regulation"):
(i) the European Commission shall have made (or be deemed to have
made) a decision, in terms satisfactory to Carnival, not to
initiate proceedings under Article 6(1)(c) of the Merger
Regulation; or
(ii) if such proceedings are initiated, the European Commission
shall have made (or be deemed to have made) a declaration or
issued a decision, in terms satisfactory to Carnival, that the
concentration (or such part of the concentration as has not
been referred to a competent authority as described in
paragraph 2 below) is compatible with the common market, any
conditions attached to the Commission's declaration or
decision being in form and substance satisfactory to Carnival;
2. if the European Commission has made a referral to a competent authority
under Article 9(1) of the Merger Regulation in connection with the
proposed acquisition of P&O Princess by Carnival, such competent
authority shall have issued such decision, finding or declaration, in
terms satisfactory to Carnival, as is necessary to approve the proposed
acquisition and permit the closing of the proposed acquisition to occur
without any breach of applicable law;
3. the expiration or early termination of all waiting periods, if any,
applicable to the contemplated transaction under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, 15 U.S.C.ss.18a;
4. at the time that the Pre-conditions in paragraphs 1, 2 and 3 above are
satisfied or waived, there being in existence no:
(i) pending or threatened action or other proceeding before any
court of appropriate jurisdiction or governmental agency
seeking to restrain, enjoin, prohibit or otherwise prevent the
consummation of the contemplated transaction or seeking to
obtain damages or other relief in connection with this
transaction which would have a material adverse effect on
either Carnival or P&O Princess; or
(ii) preliminary or permanent injunction or other order, decree, or
ruling issued by a court of appropriate jurisdiction, which
restrains, enjoins, prohibits, or otherwise makes illegal the
consummation of the contemplated transaction;
5. at the time that the Pre-conditions in paragraphs 1, 2 and 3 above are
satisfied or waived, Carnival being satisfied that the cost to P&O
Princess of terminating the Joint Venture in the event of the Offer
becoming wholly unconditional will not be in excess of $200 million;
18
6. Carnival having received all information which was provided by P&O
Princess to Royal Caribbean in connection with the Royal Caribbean
Proposal, as would be supplied if Rule 20.2 of the Takeover Code had
applied;
7. the board of P&O Princess either not convening the EGM for the approval
of the Royal Caribbean Proposal, or, if it is under an obligation to
convene such meeting, recommending that shareholders vote against the
Royal Caribbean Proposal;
8. the P&O Princess Shareholders not having passed the resolutions
required to approve the Royal Caribbean Proposal;
9. financing of the cash element of the Offer being arranged on terms
satisfactory to Carnival by no later than 21 days after the
announcement that the regulatory pre-conditions (Pre-conditions 1, 2, 3
and 4) have been satisfied or waived.
The Offer will not be made unless all the Pre-conditions other than
Pre-condition 9 have been satisfied or waived by no later than 15 October 2002,
or such later date as Carnival may, with the approval of the Panel, determine.
Carnival shall be entitled to waive all and any of the above Pre-conditions
other than Pre-conditions 8 and 9 above.
19
EXHIBIT C
FORWARD LOOKING STATEMENTS AND RESPONSIBILITY
================================================================================
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. CCL
has tried, wherever possible, to identify such statements by using words such as
"anticipate," "assume," "believe," "expect," "intend," "plan" and words and
terms of similar substance in connection with any discussion of future operating
or financial performance. These forward-looking statements, including those
which may impact the forecasting of CCL's net revenue yields, booking levels,
price, occupancy or business prospects, involve known and unknown risks,
uncertainties and other factors, which may cause CCL's actual results,
performances or achievements to be materially different from any future results,
performances or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions which may impact levels of disposable income of
consumers and the net revenue yields for CCL's cruise products; consumer demand
for cruises and other vacation options; other vacation industry competition;
effects on consumer demand of armed conflicts, political instability, terrorism,
the availability of air service and adverse media publicity; increases in cruise
industry and vacation industry capacity; continued availability of attractive
POC destinations; changes in tax laws and regulations; CCL's ability to
implement its shipbuilding program and to continue to expand its business
outside the North American market; CCL's ability to attract and retain shipboard
crew; changes in foreign currency rates, security expenses, food, fuel,
insurance and commodity prices and interest rates; delivery of new ships on
schedule and at the contracted prices; weather patterns; unscheduled ship
repairs and dry-docking; incidents involving cruise ships; impact of pending or
threatened litigation; and changes in laws and regulations applicable to CCL.
CCL cautions the reader that these risks may not be exhaustive. CCL operates in
a continually changing business environment, and new risks emerge from time to
time. CCL cannot predict such risks nor can it assess the impact, if any, of
such risks on its business or the extent to which any risk, or combination of
risks may cause actual results to differ from those projected in any
forward-looking statements. Accordingly, forward-looking statements should not
be relied upon as a prediction of actual results. CCL undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
CCL PLANS TO FILE A REGISTRATION STATEMENT ON FORM S-4 AND A STATEMENT ON
SCHEDULE TO WITH THE US SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH
THE OFFER. THE FORM S-4 WILL CONTAIN A PROSPECTUS AND OTHER DOCUMENTS RELATING
TO THE OFFER. CCL PLANS TO MAIL THE PROSPECTUS CONTAINED IN THE FORM S-4 TO
SHAREHOLDERS OF POC WHEN THE FORM S-4 IS FILED WITH THE SEC. THE FORM S-4, THE
PROSPECTUS AND THE SCHEDULE TO WILL CONTAIN IMPPORTANT INFORMATION ABOUT CCL,
POC, THE OFFER AND RELATED MATTERS. INVESTORS AND STOCKHOLDERS SHOULD READ THE
FORM S-4, THE PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS FILED WITH
THE SEC IN CONNECTION WITH THE OFFER CAREFULLY BEFORE THEY MAKE ANY DECISION
WITH RESPECT TO THE OFFER. THE FORM S-4, THE PROSPECTUS, THE SCHEDULE TO AND
ALL OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE OFFER WILL BE
AVAILABLE WHEN FILED FREE OF CHARGE AT THE SEC'S WEB SITE, AT WWW.SEC.GOV. IN
ADDITION, THE PROSPECTUS AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN
CONNECTION WITH THE OFFER WILL BE MADE AVAILABLE TO INVESTORS FREE OF CHARGE BY
WRITING TO TIM GALLAGHER AT CARNIVAL CORPORATION, CARNIVAL PLACE, 3655 N.W. 87
AVENUE, MIAMI, FLORIDA, 33178-2428, US.
IN ADDITION TO THE FORM S-4, PROSPECTUS, THE SCHEDULE TO AND THE OTHER DOCUMENTS
FILED WITH THE SEC IN CONNECTION WITH THE OFFER, CCL IS OBLIGATED TO FILE
ANNUAL, QUARTERLY AND SPECIAL REPORTS, PROXY STATEMENTS AND OTHER INFORMATION
WITH THE SEC. PERSONS MAY READ AND COPY ANY REPOCS, STATEMENTS AND OTHER
INFORMATION FILED WITH THE SEC AT THE SEC'S PUBLIC REFERENCE ROOM AT 450 FIFTH
STREET, N.W., WASHINGTON, D.C. 20549. PLEASE CALL THE SEC AT 1-800-SEC-0330 FOR
FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOM. FILINGS WITH THE SEC ALSO ARE
AVAILABLE TO THE PUBLIC FROM COMMERCIAL DOCUMENT-RETRIEVAL SERVICES AND
AT THE WEB SITE MAINTAINED BY THE SEC AT WWW.SEC.GOV.
The Directors of CCL ("Directors") accept responsibility for the information in
this presentation and to the best of their knowledge and belief (having taken
all reasonable care to ensure that such is the case) the information contained
in this presentation is in accordance with the facts and does not omit anything
likely to affect the import of such information. The only responsibility
accepted by the Directors for the information in this presentation concerning
POC and RCL, which has been compiled from published sources, is that it has been
correctly and fairly reproduced and presented
Merrill Lynch International and UBS Warburg, a business group of UBS AG, are
acting as joint financial advisers and joint brokers exclusively to CCL and no
one else in connection with the Offer and will not be responsible to anyone
other than CCL for providing the protection afforded to clients respectively of
Merrill Lynch International and UBS Warburg as the case may be or for providing
advice in relation to the Offer.
0
================================================================================
[Carnival Corporation LOGO]
Analyst Presentation
17 December 2001
================================================================================
-----------------------------------------------
Micky Arison -- Chief Executive Officer
-----------------------------------------------
2
CCL's Core Management Team
================================================================================
o Micky Arison Chairman and Chief Executive Officer
o Howard Frank Vice Chairman and Chief Operating Officer
o Gerry Cahill Senior Vice President and Chief Financial Officer
3
CCL's Offer
================================================================================
o 200p in cash and 0.1361 CCL shares for each POC share
o Value of offer - 456p(1)
o 44% premium to price prior to RCL proposal(2)
o 27% premium to close on last business day(2)
o Sharing savings if POC reduces cost of poison pills
- -----------------------
Notes:
(1) CCL's closing price as at 14 December 2001--US$27.30
(2) POC pre-announcement price--317p, POC's closing price as at 14 December
2001--360p
4
CCL: A Superior Deal For POC Shareholders
================================================================================
CCL / POC RCL / POC
- ------------------------------------------------------------------------------
o 44% premium to pre-RCL proposal o No premium
o 200p cash o No cash
o Fully values POC o Undervalues POC
o Simple transaction o Complex structure
o Strong partner o Weak partner
o Strong balance sheet o Highly geared, constrained balance sheet
- ------------------------------------------------------------------------------
Both transactions face similar regulatory issues
5
POC Shareholders Must Act Urgently
================================================================================
If POC shareholders approve RCL's proposal
CCL's superior offer CANNOT proceed
Shareholders should instruct the board of POC to:
o CHANGE ITS RECOMMENDATION TO CCL
o DEFER OR ADJOURN OR NOT CALL EGM
6
CCL -- Profile
================================================================================
o Incorporated in 1974
o Floated on NYSE in July 1987
o Current market capitalisation US$16.0 billion(1)
o Arison family controls 47%
o Revenues US$4.4 billion(2)
o EBITDA US$1.4 billion(2)
o CCL already operates in the UK vacation market through its
UK-flagged luxury brand Cunard - owner of the QE2
- -----------------------
Notes:
(1) As at close 14 December 2001
(2) Twelve months ended 31 August 2001
7
CCL Brands
================================================================================
Segment Principal markets Ships
[Carnival Cruise Lines Logo] Contemporary North America 16
[Costa Logo] Contemporary S. Europe / S. America 7
[Holland America Logo] Premium North America 10
[CUNARD Logo] Premium/Luxury UK/North America 2
[Windstar Cruises Logo] Luxury North America 4
[SEABOURN Logo] Luxury North America 4
------
43
------
8
CCL Financial Performance
================================================================================
Compound annual growth 1990-2000
-------------------------------------------
Earnings 15.2%
Net capacity(1) 11.8%
-------------------------------------------
[Carnival Corporation Net Income Graph]
1990(2) -- $ 234 million
2000 -- $ 965 million
- -----------------------
Source: Company accounts and filings
Note:
(1) Available berth days
(2) 1990 figure is income from continuing operations
9
------------------------------------------
Gerry Cahill -- Chief Financial Officer
------------------------------------------
10
CCL-POC -- The Best Combination
================================================================================
o Broad, complementary offering of well-established brands with expanded
geographic reach
o Carnival and Princess - highest unaided brand awareness in North America
o Significant synergies
o Sharing best practices
11
Pro-forma CCL-POC Fact Sheet
================================================================================
LTM(1) CCL POC CCL / POC
- ----------------------------------------------------------------------
Fleet size (ships) 43 18 61
Passengers carried (000s)(2) 2,669 919 3,588
- ----------------------------------------------------------------------
Revenue (US$m) 4,427 2,451 6,877
EBITDA (US$m) 1,440 495 1,935
- ----------------------------------------------------------------------
Market cap(3) (US$m) 16,002 3,619 18,576(4)
Net debt (US$m) 1,505 1,380 4,895(4)
Net debt / market cap 9.4% 38.1% 26.4%
- ----------------------------------------------------------------------
- -----------------------
Source: Company accounts and filings
Notes:
(1) CCL LTM to 31 August 2001 (as per US GAAP), POC LTM to 30 September 2001
(as per UK GAAP)
(2) Passengers carried as per last annual report
(3) As at close 14 December 2001
(4) Pro-forma for equity and cash consideration in transaction
12
Core Brands By Segment
================================================================================
[Graphics]
CCL:
North America:
- - Luxury: Seabourn, Windstar Cruises
- - Luxury-Premium: Cunard
- - Premium: Holland America
- - Contemporary: Carnival Cruise Lines
UK/Europe:
- - Luxury-Premium: Cunard
- - Contemporary: Costa
POC:
North America:
- - Premium-Contemporary: Princess
UK/Europe:
- - Premium: P&O Cruises, Arosa
- - Contemporary: Aida
13
===============================================
CCL --- The Better Partner For POC
===============================================
CCL Is The Most Profitable Operator
================================================================================
EBIT margin Net Income margin
(LTM)(1) (LTM)
[Graphic] [Graphic]
CCL -- 24.4% CCL -- 22.4%
POC -- 14.1% POC -- 10.9%
RCL -- 15.9% RCL -- 10.3%
- -----------------------
Source: Company accounts and filings
Notes:
(1) CCL operating income net of impairment loss
(2) CCL and RCL as per US GAAP, POC as per UK GAAP
15
CCL Is The Most Efficient Operator
================================================================================
Average cost per EBIT / ROIC(2)
berth (US$ 000)(1) Available berth days
(US$)
[Graphic] [Graphic] [Graphic]
CCL -- 136 CCL -- 62 CCL -- 12.9%
POC -- 158 POC -- 42 POC -- 9.9%
RCL -- 164 RCL -- 46 RCL -- 9.0%
- -----------------------
Source: Company accounts and filings
Notes:
(1) Gross ship PP&E net of construction in progress as at year end 2000
(2) ROIC is after-tax EBIT divided by return on average invested capital.
POC intercompany creditor in 1999 accounts treated as debt
(3) CCL and RCL as per US GAAP, POC as per UK GAAP
16
Historic Returns To Shareholders
================================================================================
CCL and RCL total shareholder returns
[Graphic]
17
===============================================
Howard Frank -- Chief Operating Officer
===============================================
18
===============================================
The RCL Proposal
===============================================
Why POC Should Not Accept RCL's Proposal
================================================================================
o No premium and no cash
o Inequitable share of economics
POC shareholders will own 50.7% of the combined entity but contribute
significantly more than this to the combined projected net earnings
Broker Date 2002 2003
- -------------------------------------------------------------------------
SSSB 29 Nov 01 64.4% 57.7%
Bear Stearns 9 Nov 01, 21 Nov 01 53.0% 57.7%
MS 21 Nov 01 59.5% 45.7%
UBSW 5 Dec 01 65.5% 59.6%
- -------------------------------------------------------------------------
Disproportionate share of earnings and synergies accrue to RCL
20
WHY POC SHOULD NOT ACCEPT RCL'S PROPOSAL
================================================================================
o Is the best management in place?
The most senior management positions in the combined group have been
awarded to the RCL Chairman and CEO
o CCL and RCL total shareholder returns
[graphics]
Last 5 years:
CCL: 93%
RCL: 41%
S&P 500 Composite: 67%
Last 12 months:
CCL: 7%
RCL: (27)%
S&P 500 Composite: (13)%
Source: Datastream
- -----------------------
Source: Datastream
21
WHY POC SHOULD NOT ACCEPT RCL'S PROPOSAL
================================================================================
o No compensation for extra financial risk
[graphics]
CCL today: A2
POC pre-20 Nov: Baa1
POC today: Downgrade to Baa3
RCL pre-20 Nov: Ba2
Note:
(1) Credit Ratings as per Moody's Investors Service
CCL POC RCL
Net debt / EBITDA (LTM) 1.0X 2.8X 5.6X
Net debt / total book cap 18.7% 34.4% 53.3%
- -----------------------
Note:
(1) Credit ratings as per Moody's Investors Service
22
POISON PILLS
================================================================================
o The poison pills destroy value for POC shareholders
o Break Fee
US$62.5 million break fee exceeds UK market norm
Takeover Code maximum US$31 million (1% of market cap)
o Joint Venture
Cruise operations do not start until 2003
No commercial logic for concluding now and risking change of control
liability
Reported US$200 million cost of change of control excessive relative to
POC's US$500 million equity contribution
o Total cost of US$262.5 million is equivalent to 26p per share
23
===============================================
THE CARNIVAL OFFER
===============================================
CCL -- PREVIOUS EXPRESSIONS OF INTEREST IN POC
================================================================================
o CCL has proposed to merge with POC both before and after spin off from P&O
o Most recently, Howard Frank called Peter Ratcliffe on 24 September 2001 to
reiterate interest in pursuing a combination - no response received
o Offer communicated by letter on 13 December 2001
o POC rejects meeting, rejects Offer
25
TRANSACTION HIGHLIGHTS
================================================================================
o 200p in cash and 0.1361 CCL shares per POC share
o Current value of offer 456p(1) (US$26.47 per ADR)
o Offer to be increased by share of reduced cost of poison pills
o Mix and match election
o CCL willing to seek a listing for its shares on the LSE
o CCL willing to consider alternative structures, including DLC
- -----------------------
Note:
(1) CCL's closing share price as at 14 December 2001--US$27.30
26
CCL'S PRE-CONDITIONS
================================================================================
PRE-CONDITIONS COMMENT
- --------------------------------------------------------------------------------
o Regulatory clearances o Similar position to RCL/POC combination
o POC's EGM - deferred or not
convened, or resolutions voted o CCL cannot proceed with the Offer if
down RCL's proposal is approved
- --------------------------------------------------------------------------------
27
CCL'S PRE-CONDITIONS
================================================================================
PRE-CONDITIONS COMMENT
- --------------------------------------------------------------------------------
o Access to information given to RCL o Would be available if Code transaction
o Cost to POC of terminating JV not o Insufficient information available to
exceeding US$200 million date
o Committed funding being arranged o Unnecessary cost given regulatory
timetable - CCL has liquidity of
approximately US$2.4 billion(1)
- --------------------------------------------------------------------------------
Note:
(1) Based on Q3 results
28
SIMILAR ANTITRUST APPROVAL ISSUES
================================================================================
o Both the CCL and RCL proposals are subject to clearance from relevant
antitrust authorities
o Advice is that the regulatory risk for CCL is no greater than for RCL
29
CCL-RCL - US ANTITRUST COMPARED
================================================================================
CCL RCL DIFFERENTIAL
- --------------------------------------------------------------------------
North American Berths
Contemporary 33,252 33,046 LESS THAN 1%
Premium 13,348 14,332 (7%)
------ ------
46,600 47,378 (1.7%)
------ ------
Luxury 4,596 0
Net income(1) S$m) 1,004 324 210%
ROIC(2) 12.9% 9.0% 43%
Market capitalisation(3) (US$m) 16,002 3,139 410%
- --------------------------------------------------------------------------------
Perception of CCL's greater size related more to profitability, not
relevant to antitrust analysis, than berths
- -----------------------
Notes:
(1) LTM
(2) For year end 2000
(3) As at 14 December 2001
(4) CCL and RCL as per US GAAP
30
EU ANTITRUST POSITION
================================================================================
Cruises make up a very small proportion of the wider vacation market in Europe
European outbound holiday volume totalled 209 million passengers in 1999 of
which 173 million were long haul(1)
Total number of European cruise holidays was 1.9 million in 1999(2)
Cruise in Europe is in its infancy amounting to 1.1% of the wider, outbound
vacation market and as such CCL believes that antitrust issues should not be a
hurdle
- -----------------------
Notes:
(1) Source: European Travel Monitor
(2) Source: G.P Wild (International) Limited
31
CCL: A SUPERIOR DEAL FOR POC SHAREHOLDERS
================================================================================
CCL / POC RCL / POC
- --------------------------------------------------------------------------------
o 44% premium to pre-DLC price o No premium
o 200p cash o No cash
o Fully values POC o Undervalues POC
o Simple transaction o Complex structure
o Credible partner o Weak partner
o Strong balance sheet o Highly geared, constrained balance sheet
- --------------------------------------------------------------------------------
Both transactions face similar regulatory issues
32
POC SHAREHOLDERS MUST ACT URGENTLY
================================================================================
IF POC SHAREHOLDERS APPROVE RCL'S PROPOSAL
CCL'S SUPERIOR OFFER CANNOT PROCEED
Shareholders should instruct the board of POC to:
o CHANGE ITS RECOMMENDATION TO CCL
o DEFER OR ADJOURN OR NOT CALL EGM
33
