Did they or didn't they? Carnival Corporation said they talked; P&O said they didn't. Then Carnival said they had talked some time ago, but were not talking now. P&O again said they had not talked. Aren't these both public companies bound by the same rules?

According to various reports, however, Carnival had offered $11.2 billion for P&O, including Princess Cruises. Analysts said later that the price was too low and that it would not benefit Carnival to also become owners of P&O's various other businesses, including its ferries. And if they were to be sold, it would be a fire-sale which again in turn would not benefit Carnival or its shareholders.

The cruise sector represented about 20 percent of P&O's total revenues and 40 percent of P&O's operating income in 1998. Thus, assuming for the sake of argument that the cruise operations represent up to 40 percent of P&O, Carnival's offer is clearly low at an estimated $225,000 per berth.

Regardless, while the reports made hot "news" in a relatively slow August month, where there is smoke there is usually fire. Coincidentally the common stock of both companies rose in value upon the sales reports.

Sales Scenario

What if Carnival were to acquire Princess Cruises? Carnival would increase its market share in North America from its present 28 percent (based on capacity available) to 46.1 percent. Internationally, the company would have 37 percent of all cruise berths.

Royal Caribbean International would trail with 24.8 percent of the North American market capacity and 17.2 percent of the capacity worldwide.

Norwegian Cruise Line would become number three in North America with 10 percent and Star Cruises number three internationally with nine percent of the worldwide cruise capacity.

Market Shares

If Princess were to join the Carnival family of cruise lines, the Carnival fleet would dominate every market.

With Princess included, the Carnival fleet would have a 63 percent share of the cruise capacity in Alaska (1999); 63 percent on the West Coast; 58 percent in New England/Canada; 53 percent in the Caribbean; 48 percent in South America; 39.5 percent of the Panama Canal transit capacity; 39 percent of the western capacity in the Far East; and 37 percent of the North American capacity in Europe.

In addition, through Princess, Carnival would gain access to Bermuda, where it has been unable to gain a foothold.

Obviously other benefits would be found in increased economies of scale, tremendous purchasing power, and increased influence over cruise-ship building - with 19 of the present 60 ships on the orderbooks (1999 through 2005).

Does It Make Sense?

Based on how Carnival lets other subsidiaries such as Holland America Line and Costa Crociere operate, Princess Cruises would fit in nicely.

The crunch could come if there is a downturn in the market and costs need to be slashed. Then the question is: would all the products under the Carnival umbrella start to look the same?

Meanwhile, Princess would contribute nicely to Carnival's bottom line.

But the question remains: Were they and are they still talking?