Next stop: London. Royal Caribbean chairman and ceo Richard Fain earlier this week brushed off Carnival's new all-shares bid as more of the same. But some analysts say the deal has been improved.
Jim Winchester of Lazard Freres notes the latest proposal removes the 'subject to financing' precondition. 'CCL's offer now appears comparable to Royal Caribbean's combination offer, considering that both deals are subject only to antitrust regulatory clearance,' he writes in new research. Winchester thinks Carnival's revised proposal has a slightly higher chance of gaining POC shareholder support (15%-20% vs. 10% previously). 'However, we sense that there is more at play than pure economic logic, with P&O Princess holders appearing to wish to "support" management's preference for the RCL offer. In addition, we have seldom seen traditional pension fund managers willing to take a stand that is counter to board recommendations - even when it may be in their own interest.'
'We believe Carnival is back in the game,' writes Jason Ader of Bear Stearns, cautioning that as with the RCL-POC combo, regulatory approval is still needed. Ader predicts a key component of Carnival's pitch to shareholders will relate to synergies. 'Royal and Princess have indicated that in the first full year of combined operation, the new company should be able to achieve approximately $100m in cost efficiencies from the deal. We think it's important to point out that while a larger portfolio of ships and brands provides the opportunity for increased cost efficiencies, there is risk of execution and that the savings don't necessarily come automatically.'