| Author (Person) | Bower, Helen |
|---|---|
| Publisher | ProQuest Information and Learning |
| Series Title | In Focus |
| Series Details | 25.7.02 |
| Publication Date | 25/07/2002 |
| Content Type | News, Overview, Topic Guide | In Focus |
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The European Commission granted clearance on 24 July 2002 to the proposed acquisition of British cruise operator P&O Princess Plc by the US-based cruise operator Carnival Corporation. Carnival, who have proposed a £3.5 billion hostile bid for the British cruise operator, are now intensifying pressure on P&O Princess to discuss the bid but the company have refused on the basis that it could jeopardise a possible nil premium merger with Royal Caribbean worth £5.3 billion. Such a merger would see the two companies take the world's number one cruise spot from Carnival. The takeover bid was notified to the European Commission for regulatory clearance in February 2002 and EU antitrust regulators initially expressed concern about the potential effects of the takeover on cruise markets in the United Kingdom and Germany. Together, Carnival and P&O Princess accounted for around a third of cruise passengers in 2000 in the European Economic Area which covers the 15 EU Member States plus Norway, Iceland and Liechtenstein. However, an in depth analysis by the European Commission found that these initial concerns were unjustified, concluding that 'the strong growth enjoyed in the market, the absence of substantial barriers to entry and the ability for rivals in the market to shift capacity, for example from the US to the UK, would exert a sufficient competitive pressure on Carnival'. The European Commission also reasoned that the high projected growth rate in cruise markets, which would encourage new operators to enter the market, would constitute a significant competitive constraint on the incumbent cruise operators and the additional cruise ship capacity scheduled for Carnival and P&O in the next three years will also constrain their ability to raise prices as they will need to continue to persuade a sufficient number of holidaymakers to take up cruising to ensure high utilisation rates of this new capacity. The decision by the European Commission reverses a preliminary opinion on the merger in May 2002 when the European Commission indicated that the deal would be blocked unless Carnival made substantial disposals in the UK and Germany. Even two weeks before the decision the European Commission continued to express concern about the effects of the possible merger on the German cruise market. Such a U-turn has led to much speculation in the media about the real reason for the rethink. Many believe that it indicates a fundamental change in the way the EU examines mergers following recent rulings in the European Courts, such as the Airtours/First Choice case, which have overturned decisions by the European Commission. Despite the EU's clearance of the proposed merger it is unclear whether it will go ahead. P&O Princess appears to favour the friendly merger with Royal Caribbean but both this merger and that with Carnival have yet to be cleared by the Federal Trade Commission of the United States. A decision is expected in September 2002. Links: European Commission: European Sources Online: Financial Times:
Carnival Corporation P&O Princess Cruises plc Royal Caribbean Helen Bower The European Commission granted clearance on 24 July 2002 to the proposed acquisition of British cruise operator P&O Princess Plc by the US-based cruise operator Carnival Corporation. |
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| Subject Categories | Internal Markets |
