Filing under Rule 425 under
the Securities Act of 1933
and deemed filed under Rule 14d-9(a)
of the Securities Exchange Act of 1934
Filing by: P&O Princess Cruises plc
Subject Company: P&O Princess Cruises plc
SEC File No. of Princess: 001-15136
On January 8, 2003, the following interview of Peter Ratcliffe, Chief Executive
Officer of P&O Princess Cruises plc, was conducted and released on www.cantos.
com:
Integration with Carnival
Q: Today you're recommending the Carnival DLC deal, tell us why you're doing
this?
A: I think we see this as a very exciting opportunity to further accelerate
the creation of value for our shareholders. A combination of P&O Princess
and Carnival will create one of the leading global vacation companies; it
will have a whole array of leading consumer brands in every major cruise
market in the world. It will have a wonderful fleet of over 50 ships, a
very modern fleet and will be able to strategically deploy this to
maximise the potential of those brands and maximise the global reach of
the company.
We'll also have the opportunity to reduce costs by taking advantage of
the potential synergies between the two groups. And from the point of
view of our shareholders, clearly we'll have a much stronger balance
sheet, which protects us against any possible downside scenarios in the
future. And of course through the DLC we've enabled our British
shareholders to retain their shares and participate in this growth for
the future.
Q: It's taken a very long time though hasn't it? 15 months ago you were
talking about merging with Royal Caribbean so with hindsight would you
have done things any differently?
A: It has taken a long time, we started this process in November 2001. Now
of course most of that time has been taken getting regulatory clearance.
We had to obtain clearance from the United States, in Europe, in Germany,
and in the United Kingdom. Actually things have moved quite swiftly since
we got that approval in early October and we're now moving forward very
quickly with the transaction.
Q: Are you happy with the costs that have been incurred though? There was a
break fee to Royal Caribbean and the advisors fees, was it worth it?
A: I think so. Clearly at the end of the day it's up to other people to
judge the costs and how long it's taken. But from where I sit today, we
look at the company and on de-merger our shares were (pound)2.90, today
they're at (pound)4.40. We've outperformed the UK stock market by 83 per
cent and we're in a position to put before our shareholders today an
opportunity that will accelerate the creation of value even more. Whilst
it has been a long process and there has been cost incurred, I think this
is very much a process that's been in the best interest of our
shareholders.
Q: You mentioned the synergies from the integration, where exactly do you
see these potential savings?
A: The synergies that we're referring to are those cost efficiencies which
we can make and we see them in three major areas: purchasing, scale and
rationalisation of certain support functions. We'll be able to share best
management practices with all the different brands within the Carnival
family which we believe will be quite significant. Carnival originally
estimated some $100m of synergies. Clearly that was a number that was
compatible with our own projections and now we've signed the
Implementation Agreement we're in a position for the teams to get
together and start to develop detailed plans. I am quite optimistic as to
how that will turn out.
Q: What about people?
A: First of all this isn't a redundancy story, although naturally that's a
question that's asked. This company will be growing by 45 per cent over
the next four years so it's a great opportunity for our staff. There will
be development, growth, new experiences. Inevitably when you're
rationalising there will be some changes that will take place, but we're
going to try to do that in a way that is as helpful and as creative as we
can possibly be.
Q: What have you heard from Carnival on this?
A: I think one of the great things about this combination is that Carnival
and P&O Princess have a very similar view of the market, the company,
what we should be doing and a very similar attitude to how we'd like to
develop our staff. So I think we both look at this in a very similar way.
Board & management
Q: You've announced the new board structure, what will your role be?
A: My role will be to look after the existing P&O Princess businesses, the
AIDA, P&O and Princess and also to assist with integrating the two
companies.
Q: You personally, are you happy with this?
A: Yes I am. Clearly I am one of the prime people who was responsible for
recommending this and therefore I recognise the responsibility I have to
our shareholders, our staff, and to Carnival to ensure that we move
forward with P&O Princess in a very smooth way, and that we integrate the
companies as well as we possibly can. From a personal viewpoint I'm
actually quite excited about it, because clearly this new company is
going to be one of the leading vacation companies in the world and I will
have the opportunity to be part of that very exciting development, and
work with what is one of the very best management teams in the industry.
Q: And as for the non-executives, how were their roles decided?
A: There are only three independent non-executives in P&O Princess and
clearly we were looking for independent non-executives. And I think in
Baroness Hogg and Sir John Parker, we have two outstanding individuals
who have worked tirelessly in support of the executive and the Board as
we've moved through this whole process since de-merger. I don't think I
could think of two better recommendations.
Q: The directors themselves, will they be benefiting personally from this
transaction?
A: Clearly all the directors are also shareholders of the company so to that
extent we benefit in the same way as all the shareholders do. With
regards to executive remuneration, which I'm sure people are interested
in, there is an incentive programme within the company which includes a
matching awards programme set against certain financial targets. Now this
programme will be accelerated and a full pay out will be made, that is
the main financial impact of this transaction for the individuals
concerned.
Q: You personally what do you stand to gain?
A: Well I'm part of that programme and I will have allocated to me 250,000
shares, which represents more than(pound)1m at today's market price.
Q: What about the executives who will be leaving, how will they be
compensated, like your CFO Nick Luff for instance?
A: That will be done in accordance with their contracts. There is no
executive director that has more than a 12 month contract so in the case
of Nick, for example, he would be paid out a normal severance payment of
12 months.
Q: And why is Nick Luff leaving?
A: I'm sure you understand that in a takeover situation one will normally
wish to keep one's own CFO and that's exactly what Carnival have done.
They have actually expressed a desire to have Nick stay with the company
and have considered various roles for him but Nick has decided that he
wishes to continue his future as a CFO and will be looking for a new
position as a CFO. And I'd just like to take the opportunity to say that
none of what has happened over these last two years, starting with the
de-merger from P&O, the two years operating that we've done and the
creation of this further opportunity, none of that would be possible
without the commitment and effort of Nick. So he will be missed by both
Carnival and Princess.
Q: As for Lord Sterling, what will his role be?
A: I think as we previously announced, Lord Sterling was going to retire and
in fact extended his retirement until this transaction was completed. So
the date it is completed he will be stepping down as Chairman and
stepping down from the Board, but I know that Carnival, and Micky Arison
in particular, have a very high opinion and value for all the experience
that Lord Sterling has had and the success he's had in this company.
Micky will be working with Lord Sterling to try and find a way that we
can continue to benefit from his advice and experience.
Q: We said before you're the only executive director on the combined Board,
so how can the UK shareholders feel secure that their interests will be
championed?
A: With the UK shareholders the first thing you have to understand is the
DLC was put in place primarily for their benefit so they could retain
their shareholding in the company. Of course we now have a new company
and I know that Micky and Howard, Micky Arison and Howard Frank, are very
committed to maintaining the UK shareholder base. It is a very important
market for us, Carnival alone invested (pound)1.2bn in the UK market and
we'll have a major presence here. So I think they are totally committed
to it, they will make the effort to have good investor relationships
here. Along with the three
ex P&O Princess directors, we all know the shareholders very well and
we're always available for consultation as required. With the new Board
we have, we have a senior non-executive who will be available for
consultation as well. So I think all in all the British shareholders
should be very happy with the situation.
Q: You say the two Boards will be identical, Micky Arison is going to be the
Chief Executive, the Chairman and the largest shareholder of the combined
Board, so how can he continue in these roles whilst adhering to the UK
corporation governance best practice?
A: Of course Micky Arison has been a very, very successful businessman and
has the reputation of putting his shareholders first and has created a
lot of value for them over the years. So I think to have Micky as the
Chairman and CEO of this company is very reassuring and of course in
terms of corporate governance to have a combined Chairman and CEO is not
that unusual in the US. But when you set it against all the changes that
have been made with regards to corporate governance in the future, they
are quite wide ranging. The new company will be conforming to the
Sarbanes-Oxley requirements in the United States, and it will be
conforming to the UKLA requirements. In particular it is worth noting
that all the non-executives will now be independent and there will be a
senior non-executive who is head of that group. He will be elected
annually by that group and clearly will be available to shareholders to
answer any questions that they may have.
DLC structure
Q: P&O is going to be, at most, just 26 per cent of the combined group so
does this mean the shares will trade at a discount on the London Stock
Exchange?
A: The structure of this deal is a dual-listed company and so there is
actually a float in the United Kingdom and a float in the United States.
So, there is always the possibility that those share prices will vary and
that one could be at a discount. Whether it will actually operate at a
discount or not will depend upon the liquidity, which I think will be
very good. There are a substantial
amount of shares being listed here, it will remain part of the FTSE 100
and I think that's important and it will also depend on the demand for
shares that arises in the United Kingdom. I think the experience we've
had in P&O Princess is that there is more and more interest in investing
in a company like ours that's in this growth segment of the vacation
market. It has been very successful and expects to continue to be
successful. So we believe we shouldn't see a discount develop to any
significant extent.
Q: Carnival has made a partial share offer alongside the DLC, what
proportion of shareholders do you expect to take up this offer?
A: I think that we would anticipate it's probably going to be a full
take-up. The partial share exchange offer is being made so that we can
accommodate both the British shareholders who cannot hold US Securities
and those of our shareholders who can. And so we're trying to give an
opportunity for both types of shareholders to retain their interest in
the future.
Q: If demand is going to be high as you say it is, does that mean that 20
per cent is not enough then?
A: You can never be absolutely precise as to what is going to be enough.
It's a matter of balancing on the one hand the liquidity of the remaining
UK shares, the demand for those shares, estimating what our UK
shareholders really require and on the other hand the US demand. So I
think the 20 per cent is the best estimate this Board could make as to
what was an appropriate split between the two types of shareholders.
Q: It appears from your press release that you can't tender borrowed shares
into the partial share exchange offer, why is that?
A: It's a technical situation, clearly there have been very few partial
exchange offers in the United States and of course, this is the first DLC
in the United States. So, to a certain extent we're on relatively
unfamiliar territory. We've been advised by our lawyers that it is a
breach of SEC regulations to borrow stock and then tender in to the
partial share exchange so we believe it's our obligation to draw our
shareholders' attention to that situation so they can be as well informed
as possible as we move forward.
Timetable
Q: The European Union has announced that it will re-examine the Carnival
deal so how long a delay do you expect this to cause?
A: That won't cause a delay, it's just a technical refiling because it's now
a DLC as opposed to a share purchase.
Q: So then in terms of the deal breakers, are there any? Can Carnival still
walk away?
A: Essentially no, I think now all the pre-conditions have been approved. We
have the regulatory approval, we are now out of the joint venture and
we've made our recommendation so all the pre-conditions have been
removed. Most of the conditions, in fact all the conditions, are
relatively straightforward from this point on. I suppose the only issue I
should draw everybody's attention to is, as is always the case in
contracts of this nature, there is a material adverse change clause which
allows people to withdraw if there is a material adverse change but I
think most shareholders are familiar that is a very high hurdle and it
has to disproportionately affect one side or the other.
Q: Can Royal Caribbean come back with an improved offer now?
A: No, if you think, two months ago we advised Royal Caribbean that we
believed the Carnival transaction was superior. Since that date we have
been in constant touch with Royal Caribbean and of course we'd always
have been open to them coming back with a revised proposal. That has not
happened and so today we signed the contract with Carnival, we are
committed to Carnival and we're now going to complete this transaction.
Q: So the door is closed to Royal Caribbean?
A: Effectively it's closed.
Q: You don't expect a delay from the EU then what's the time table now?
A: We're now filing the documents with the SEC and we expect that could take
some two months. By the end of February we hope to be in a position to
circulate to our shareholders the final documentation and to hold the
Extraordinary General Meeting towards the end of that month, maybe in
early April. On the assumption that they were to approve their
transaction we would then close the transaction within a few days after
that.
FORWARD LOOKING STATEMENTS AND RESPONSIBILITY
CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements contained in this announcement are "forward-looking
statements" that involve risks, uncertainties and assumptions with respect to
P&O Princess and Carnival and their respective subsidiaries and the Combined
Group, including certain statements concerning the transactions described
herein, profit forecasts, working capital, future results, plans and goals and
other events which have not yet occurred. These statements are intended to
qualify for the safe harbours from liability provided by Section 27A of the U.S.
Securities Act of 1933, as amended, and Section 21E of the U.S. Securities
Exchange Act of 1934, as amended. You can find many (but not all) of these
statements by looking for words like "will", "may", "believes", "expects",
"anticipates", "forecast", "future", "intends", "plans" and "estimates" and for
similar expressions. Because forward-looking statements involve risks and
uncertainties, there are many factors that could cause the transactions
described herein not to occur and/or each of P&O Princess', Carnival's and the
Combined Group's actual results, performance or achievements to differ
materially from those expressed or implied in this document. These factors
include, but are not limited to, the following: regulatory and shareholder
approvals of the DLC transaction; achievement of expected benefits from the DLC
transaction; risks associated with the combination of Carnival's and P&O
Princess' businesses by means of a DLC structure; liquidity and index inclusion
as a result of the implementation of the DLC structure, including a possible
mandatory exchange; risks associated with the uncertainty of the tax status of
the DLC structure; general economic and business conditions which may impact
levels of disposable income of consumers and the net revenue yields for the
cruise products of Carnival, P&O Princess and the Combined Group; conditions in
the cruise and land-based vacation industries, including competition from other
cruise ship operators and other vacation alternatives and increases in cruise
ship and land based vacation alternative capacities; the impact of operating
internationally; the international political and economic climate, armed
conflict, terrorist attacks and other world events and negative media publicity
and their impact on the demand for cruises; accidents and other incidents at sea
affecting the health, safety and security of passengers; the ability of
Carnival, P&O Princess and the Combined Group to implement their shipbuilding
programs and brand strategies and to continue to expand their businesses
worldwide; the ability of Carnival, P&O Princess and the Combined Group to
attract and retain shipboard crew; the ability to obtain financing on terms that
are favourable or consistent with Carnival's, P&O Princess' and the Combined
Group's expectations; the impact of changes in operating and financing costs,
including changes in foreign currency and interest rates and security, fuel,
food and insurance costs; changes in the tax, environmental and other regulatory
regimes under which each company operates; and the ability of a small group of
shareholders to effectively control the outcome of shareholder voting. In
addition, the paragraph entitled "risk factors" in P&O Princess' annual report
on Form 20-F filed with the US Securities and Exchange Commission contains
important cautionary statements and a discussion of many of the factors that
could materially affect the accuracy of P&O Princess' forward-looking statements
and/or adversely affect its business, results of operations and financial
position, which statements are incorporated herein by reference.
P&O Princess cautions the reader that these risks may not be exhaustive.
Carnival and P&O Princess operate in a continually changing business
environment, and new risks emerge from time to time. P&O Princess cannot predict
such risks nor can it assess the impact, if any, of such risks on the businesses
of Carnival and P&O Princess 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. Subject to any continuing obligations under applicable law or
any relevant listing rules, P&O Princess expressly disclaims any obligation to
disseminate, after the date of this document, any updates or revisions to any
such forward-looking statements to reflect any change in expectations or events,
conditions or circumstances on which any such statements are based.
P&O PRINCESS PLANS TO FILE REGISTRATION STATEMENTS ON FORM F-4 WITH THE US
SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH THE DEEMED EXCHANGE OF P&O
PRINCESS SHARES AND ISSUANCE OF THE SPECIAL VOTING SHARE IN CONNECTION WITH THE
DLC TRANSACTION, AND CARNIVAL HAS INDICATED THAT IT PLANS TO FILE A REGISTRATION
STATMENT ON FORM S-4 IN CONNECTION WITH THE PARTIAL SHARE OFFER. THE FORMS F-4
WILL CONTAIN A PROSPECTUS AND OTHER DOCUMENTS RELATING TO THE DEEMED EXCHANGE OF
P&O PRINCESS SHARES AND/OR THE DLC TRANSACTION, AND THE FORM S-4 WILL CONTAIN A
PROSEPCTUS AND OTHER DOCUMENTS RELATING TO THE PARTIAL SHARE OFFER AND/OR THE
DLC TRANSACTION. P&O PRINCESS PLANS TO MAIL A CIRCULAR WITH RESPECT TO THE DLC
TRANSCATION TO SHAREHOLDERS OF P&O PRINCESS AFTER THE FORM F-4 HAS BEEN DECLARED
EFFECTIVE BY THE SEC, AND CARNIVAL HAS INDICATED THAT IT PLANS TO MAIL THE
PROSPECTUS CONTAINED IN THE FORM S-4 TO SHAREHOLDRES AFTER THE FORM S-4 HAS BEEN
DECLARED EFFECTIVE BY THE SEC. THE CIRCULAR, FORM F-4, FORM S-4 AND THE
PROSPECTUSES WILL CONTAIN IMPORTANT INFORMATION ABOUT P&O PRINCESS, CARNIVAL,
THE DEEMED EXCHANGE OF P&O PRINCESS SHARES, THE DLC TRANSACTION, THE PARTIAL
SHARE OFFER AND RELATED MATTERS. INVESTORS AND STOCKHOLDERS SHOULD READ THE
CIRCULAR, FORM F-4, FORM S-4, THE PROSPECTUSES AND THE OTHER DOCUMENTS FILED
WITH THE SEC IN CONNECTION WITH THE DEEMED EXCHANGE OF P&O PRINCESS SHARES AND
THE PARTIAL SHARE OFFER CAREFULLY BEFORE THEY MAKE ANY DECISION WITH RESPECT TO
THE DLC TRANSACTION AND THE PARTIAL SHARE OFFER. THE CIRCULAR, FORM F-4, FORM
S-4, THE PROSPECTUSES, AND ALL OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION
WITH THE DLC TRANSACTION 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 DLC TRANSACTION WILL BE MADE
AVAILABLE TO INVESTORS FREE OF CHARGE BY WRITING TO P&O PRINCESS CRUISES PLC,
11-12 CHARLES II STREET, LONDON SW1Y 4QU, ENGLAND, ATTENTION COMPANY SECRETARY.
IN ADDITION TO THE FORM F-4, THE PROSPECTUS AND THE OTHER DOCUMENTS FILED WITH
THE SEC IN CONNECTION WITH THE DEEMED EXCHANGE OF P&O PRINCESS SHARES IN
CONNECTION WITH THE DLC TRANSACTION, P&O PRINCESS IS OBLIGATED TO FILE ANNUAL
REPORTS 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 1-800-732-0330 FOR FURTHER INFORMATION ON THE PUBLIC REFERENCE ROOM.
FILINGS WITH THE SEC ARE ALSO AVAILABLE TO THE PUBLIC FROM COMMERCIAL
DOCUMENT-RETRIEVAL SERVICES AND AT THE WEB SITE MAINTAINED BY THE SEC AT
WWW.SEC.GOV.