Royal Caribbean Cruise Lines 2001 Annual Report Download - page 31

SELECTED STATISTICAL INFORMATION (UNAUDITED):
2001 2000 1999
Guests Carried 2,438,849 2,049,902 1,704,034
Guest Cruise Days 15,341,570 13,019,811 11,227,196
Occupancy Percentage 101.8% 104.4% 104.7%
PROPOSED DUAL-LISTED COMPANY MERGER WITH
P&O PRINCESS CRUISES PLC
On November 19, 2001, we entered into an agreement with
P&O Princess Cruises plc (P&O Princess), providing for the
combination of Royal Caribbean and P&O Princess as a merger
of equals under a dual-listed company structure. If the dual-listed
company merger is completed, it would involve a combination
of the two companies through a number of contracts and
certain amendments to our Articles of Incorporation and By-Laws
and to P&O Princess’ Articles and Memorandum of
Association. The two companies would retain their separate
legal identities but would operate as if they were a single
unified economic entity. The contracts governing the dual-listed
company merger would provide that the boards of directors of
the two companies would be identical and that, as far as possi-
ble, the shareholders of Royal Caribbean and P&O Princess
would be placed in substantially the same economic position as
if they held shares in a single enterprise which owned all of the
assets of both companies. The net effect of the dual-listed
company merger would be that the shareholders of Royal
Caribbean would own an economic interest equal to 49.3% of
the combined company and the shareholders of P&O Princess
would own an economic interest equal to 50.7% of the
combined company.
The obligations of Royal Caribbean and P&O Princess to effect
the dual-listed company merger are subject to the satisfaction of
various conditions, including the receipt of certain regulatory
approvals and consents and approval by the shareholders of
each of Royal Caribbean and P&O Princess. No assurance can
be given that all required approvals and consents will be
obtained, and if such approvals and consents are obtained, no
assurance can be given as to the terms, conditions and timing of
the approvals and consents. If the dual-listed company merger
is not completed by November 16, 2002, either party can
terminate the agreement if it is not in material breach of its
obligations thereunder. We have incurred, and continue to
incur, costs which have been or will be deferred in connection
with the dual-listed company merger. In the event the transaction
is not consummated, we would be required to write these costs
off, resulting in an estimated impact to earnings of approximately
$15 million. If the dual-listed company merger is completed,
these deferred costs, together with additional costs, would be
capitalized as part of the transaction.
If the merger agreement is terminated under certain circum-
stances, we would be obligated to pay P&O Princess a break
fee of $62.5 million. These circumstances include, among other
things, our board of directors withdrawing or adversely
modifying its recommendation to shareholders to approve the
dual-listed company merger, our board of directors recom-
mending an alternative acquisition transaction to shareholders,
and our shareholders failing to approve the dual-listed
company merger if another acquisition proposal with respect
to Royal Caribbean exists at that time. Similarly, P&O Princess
would be obligated to pay us a break fee of $62.5 million upon
the occurrence of reciprocal circumstances.
In December 2001, Carnival Corporation (Carnival) announced
a competing pre-conditional offer to acquire all of the
outstanding shares of P&O Princess. In connection with its pre-
conditional offer, Carnival solicited proxies from P&O Princess’
shareholders in favor of an adjournment of the P&O
Princess’ special meeting prior to a shareholder vote to
approve the dual-listed company merger. On February 14,
2002, Royal Caribbean and P&O Princess convened special
meetings of their respective shareholders to approve the dual-
listed company merger. Prior to voting to approve the merger,
the shareholders of each company voted to adjourn their
respective meetings until an unspecified future date. We do not
know at this time the date on which the meetings will be
reconvened.
JOINT VENTURE WITH P&O PRINCESS
On November 19, 2001, we entered into a joint venture
agreement with P&O Princess to target customers in southern
Europe. The joint venture company is owned 50% by P&O
Princess and 50% by us. Each party has committed up to
$500.0 million in shareholder equity, with approximately
$5.0 million contributed by each party to date and the balance
due and payable when called by the joint venture company. Each
party has agreed to assign two identified ship-build contracts to
the joint venture company, which will be held in trust for the joint
venture company pending such assignments. Any payments we
have made under these contracts prior to assignment will be
credited against our shareholder equity commitment. Subject to
the terms of the agreement, the joint venture agreement can be
terminated by either party if certain commercial benchmarks
have not been achieved by January 1, 2003 or April 1, 2003. The
joint venture agreement does not require the approval of the
shareholders of Royal Caribbean or P&O Princess. (See Future
Commitments.)
Royal Caribbean Cruises Ltd. 29
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)