Carnival’s Cunard Isn’t for Sale

Carnival Corp., the world’s biggest cruise operator, said Monday that selling the Cunard line, with the QE2, was too high a price to pay for regulatory clearance of its $6.7-billion bid for P&O; Princess Cruises.

But the U.S. group said it would be willing to get rid of British operator P&O; Cruises-UK in an effort to win over European Union officials opposed to the deal, which is aimed at securing Carnival’s market leadership and driving down costs.

“The fact they are saying they are prepared to look at selling P&O; Cruises-UK shows how committed they are,” said Simon Champion, an analyst at Deutsche Bank.

Carnival launched its hostile offer for P&O; Princess last year in an attempt to thwart a previously agreed to merger between Royal Caribbean Cruises Ltd. and P&O; Princess, the world’s No. 2 and No.3 cruise operators.

P&O; Princess shareholders have decided to put the Royal Caribbean deal on hold to give regulators time to look at both bids.

Sources told Reuters last week that the European Commission has raised objections to Carnival’s bid, triggering talk that it might be forced to sell luxury line Cunard.

“Should Carnival be required to divest assets in Europe as a condition of regulatory clearance for its proposed bid to acquire P&O; Princess, Carnival would not consider disposing of Cunard Line,” Carnival said.

The bid battle began late last year when the world’s three largest cruise operators were forced to look for cost-cutting alliances to help cope with a sharp fall in tourism after the Sept. 11 attacks on the United States.

In a sign of its commitment to Cunard, Carnival is investing $1.2 billion in building new ships for the line, including the world’s biggest passenger ship Queen Mary 2.

Carnival said it would be prepared to sacrifice P&O; Cruises-UK, “should it ultimately prove necessary” to get clearance. P&O; Cruises-UK operates four ships in the British cruise market, competing with Carnival, Royal Caribbean and Norwegian Cruise Line.

But analysts and investors said all along that regulators would have objections to both mergers, particularly any deal involving Carnival with a North American market share of more than 30%.

Alongside the European Commission probe, Britain is conducting its own review of the Royal Caribbean/P&O; Princess deal. A decision is due within the next month.

Carnival said it was “fully dedicated” to getting regulatory clearance for its bid, which has been bitterly opposed by P&O; Princess’ management. Its executives continue to back Royal Caribbean.

P&O; Princess shareholders rebelled in February by voting to adjourn a meeting to approve the Royal Caribbean deal in order to give regulators more time to examine the competing offers.

No cash or shares would change hands under the Royal Caribbean merger, and both companies would retain separate listings. Princess shareholders would own 50.7% of the enlarged group, which would have Royal Caribbean Chief Executive Richard Fain as its new chief executive.