P&O nixes Festival Cruises purchase

NEW YORK -- P&O, the British-based parent of Los Angeles-based Princess Cruises, called off its planned purchase of Greek cruise operator Festival Cruises, citing "low valuations of cruise companies arising from current stock market evaluations" in the U.S.

In May, P&O announced it would buy Festival in a $600 million deal. P&O, which is publicly traded in London, will continue with its plans to split the company's cruise operations from its shipping and ports businesses, said company officials.

P&O's shares have fallen 23% since early June prior to warnings from U.K.-based analysts that extra capacity and U.S. competition would affect cruise-industry revenues.

"Taking everything into account, we both arrived at the conclusion that this was probably not the best time to take the step of joining forces," said Lord Sterling, P&O's chairman, in a statement.

Festival chairman George Poulides said the companies would "remain friends" and look to develop "opportunities to benefit both companies."

Festival will continue its plans to introduce new ships in 2001 and 2002, said Poulides.

Shares of cruising's largest U.S.-traded companies, Carnival Corp. and Royal Caribbean Cruises Ltd., have fallen nearly 60% since February amidst analysts' fears of an oversupply of new cruise berths.

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