Carnival Closer to POC Merger

In a surprise move, the European Commission unconditionally approved Carnival Corporation's takeover bid for P&O Princess Cruises (POC), contrary to previous indications.

In a prepared statement, the Commission presented the somewhat unusual rationale behind its decision: It said it had initially been concerned about the parties' strong position in the cruise market in the U.K. and Germany. But after what it called an in-depth analysis, the Commission concluded that the strong market growth, the absence of substantial barriers to entry (!), and rivals' ability to shift market capacity, would exert sufficient competitive pressure on Carnival.

The Commission also said that the projected market growth would in itself constitute a competitive constraint on the incumbent cruise operators as "high growth rates provide an incentive for new operators to enter the market."

The Commission also concluded that the merger would "not have any significant impact on the cruise markets in Spain, Italy, France or other European countries."

But before any deal can be concluded, the Federal Trade Commission (FTC) must arrive at its decision, which is now expected in September.

If the FTC gives its go-ahead, it will be up to the shareholders of POC to decide whether to accept Carnival's offer or to go with the original merger proposal with Royal Caribbean Cruises.

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