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Carnival Corp. wants to meet with London-based P&O Princess Cruises and its advisers to discuss how the two cruise lines might merge without causing P&O to incur burdensome breakup fees from the termination of its agreed $7 billion deal with Royal Caribbean Cruises Ltd. P&O declined the request, which was contained in a letter to P&O dated Sunday. In the letter released Jan. 8, Carnival chairman and CEO Micky Arison said certain issues regarding P&O’s merger with Royal Caribbean remain unclear, and said a meeting to clear up the questions could “enable us to offer additional value and certainty to your shareholders.” The cost of exiting the $4.6 billion Royal Caribbean merger is $388 million to $484 million, plus the $62.5 million break-up fee, Miami-based Carnival believes, according to the letter. The bulk of the exit costs stem from the break-up of a joint venture that P&O and Royal Caribbean negotiated simultaneously with their merger to offer cruises in southern Europe. Carnival has called the joint-venture agreement a poison pill to ward off competing deals. Carnival adds that it believes there may be a way to scuttle the joint venture without incurring any costs, possibly by not accepting any cruise reservations in the joint venture and thereby failing to meet performance benchmarks set for the JV. P&O wrote back, in a letter dated Tuesday, that Carnival’s latest approach “does not appear to change any of the terms of your proposal or provide any new information that would change our understanding of it.” P&O Princess has said it can’t start discussions with hostile bidder Carnival as it would breach terms of its merger agreement with Royal Caribbean. “Having reviewed your documents, we believe that you are free to meet us without triggering the break fee or any other adverse consequences,” Arison wrote. The company added P&O can hold a shareholder meeting on the Royal Caribbean deal any time before Nov. 16 without jeopardizing the merger pact, and therefore should delay the meeting until the antitrust reviews of the two competing deals have been completed. The meeting is set for Feb. 14. Arison added that Carnival believes there’s no difference between the regulatory conditions attached to its offers compared to those in the Royal Caribbean proposal. “We have also been advised that there will be no adverse impact on the regulatory outcome as a result of the two proposals being reviewed simultaneously. Indeed, we understand that the FTC has started an investigation of the Royal Caribbean proposal involving the same lawyers and economists who are investigating our proposal,” Arison wrote. Richard Fain, chairman and chief executive officer at Royal Caribbean, confirmed to analysts Tuesday that the Federal Trade Commission had started its investigation of its merger with P&O in “November to early December.” Carnival made a so-called pre-conditional offer for P&O on Dec. 16 worth $4.6 billion. In the letter, Carnival also said that it has an undrawn $2.4 billion credit facility “more than sufficient to satisfy the cash element of our offer.” Carnival added it’s willing to explore “alternative transaction structures, including some for of dual listed structure…” The P&O-Royal Caribbean deal is structured so that shares of each company remain in their current legal form and continue to trade on their respective stock exchanges. Copyright (c)2002 TDD, LLC. All rights reserved.

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