P&O has acquired Festival Cruises in a deal that could be worth up to $700 million, including the assumption of $300 million of long-term debt, pending future profits. Payment would be a mixture of cash and shares in the new cruise company to be created later this year when P&O spins off its cruise division.

"The (profit) targets are highly realistic and within the strong performance both sides expect of Festival in 2000 and 2001," said George Poulides, chairman of Festival.

Festival has a four-ship fleet with a combined passenger capacity of approximately 3,700, which gives an estimated per-berth evaluation of nearly $190,000.

Festival is owned by a small consortium of Greek shipping partners, including the Poulides family which controls 60 percent.

Poulides said that Festival did not feel under pressure to sell and already had aggressive growth plans, which included a public listing.

He said that Festival had been approached by a number of interested parties, including P&O, with which he said there was an "abundance of personal chemistry and similar ideas about the future which made joining forces an attractive propositon."

According to Poulides, the plan is to preserve Festival's character and operation more or less as they are, and to continue to grow the company. That may also include introducing one or more Grand-class ships under the Festival banner, he added.

With the acquisition of Festival, P&O is on its way to becoming the largest single cruise company in Europe operating several brands: P&O Cruises and Swan Hellenic out of Great Britain, Aida Cruises in German-speaking markets, and now Festival, which is pan-European product.

In 2000, Costa Crociere and Sun Cruises will have an estimated 31 percent share of the European markets; Royal Olympic and Louis Cruise Lines will have 26 percent; and P&O will have 25 percent. But by 2004, Europe will be dominated by P&O with a 39 percent market share and Costa and Sun Cruises with 33 percent.