Completion of acquisition Essay
Despite all the arguments posed by the parties are denied, on July 24, 2002, the commission delivered a final conclusion that the acquisition between Carnival Corporation and P&O Princes plc will not caused competition in the common market to be disturbed. The conclusion is mainly based by Commission’s calculation that combined national market share between the parties in each country of the customer would not exceed 60 %. The worldwide share of the market owned by the parties (by customer count) in the year 2000 would combine to be only 32% (Carnival 19% and POPC 13%) (‘Commission’, 2002).
On April 17, 2003, Carnival Corporation and Carnival plc completed a dual listed company transaction trough a series of contracts and amendments. III. 4 Post Acquisition Consolidated Performance III. 4. 1 Market Share By July 8, 2004, the company has created a record among the cruise industry. The combined enterprises owned 77 ships operating under 12 cruise brands. The Miami based company has now 47% of the world’s cruise operator market share. Timothy Conder, a business analyst, believes that the cruise industry remains in its infant stages, accounting for only 2 % of global tourism.
Only 16% of North Americans (averagely 70 % of
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The net Revenue yields grew 13. 2% on an increase in capacity, which indicated strong pricing power. These results were considered amazing due to the rising oil price and the global violence weren’t enough to eliminate profit (Eidham, 2004). Carnival’s stock jumped 128% from $20. 60 in mid 2003 to $47 on July 7 as the tickets sold leaped 48% to $7. 4 billion and non ticket revenue jumped 50% to 2. 1 billion (Carnival, 2005). Below is Carnival’s 3 years restated summary of income statements. Income Statement 2002 2003 2004.
Sales ($mill) 4,383 6,718 9,727 Operating Income ($mill) 1,042 1,383 2,173 Income Tax ($mill) -57 29 47 Net Income ($mill) 1,016 1,194 1,854 Earnings/Share ($) 1. 69 1. 63 2. 24 EPS ($) 1. 69 1. 63 2. 24 Dividends/Share ($) 0. 42 0. 44 0. 53 Total Shares (mill) 587 719 803 Table 3 Carnival Consolidated Income Statement Available at http://quicktake. morningstar. com/Stock/search From the stated income summary, we can assess that until 2004, (one year period after the acquisition) the company have had a tremendous leap of profitability performance.
In two years, its sales, operating income and net income were practically doubled, its stockholders related ratios also shows a significant increase compared to last year. The financial statement displayed that the company has obviously recovered from its previously declining performance trend. The year 2004 alone reflected that the acquisition of Carnival plc, have impacted in the most positive way for the company’s performance. Despite the issues of increasing oil price and global insecurity, the company achieved amazing results unpredicted even by analysts.
In addition, for a clearer comparison of Carnival plc (formerly P&O Princess plc) liquidity performance we will also display its financial health ratios before and after the acquisition. Carnival plc Key ratios 2002 2004 Financial Health Ratios Current Ratio 0. 57 0. 34 Quick Ratio 0. 48 0. 21 Financial Leverage 2. 25 1. 75 Debt/Equity 1. 25 0. 50 Table 4 Carnival plc Key Ratios Available at http://quicktake. morningstar. com/Stock/search These ratios (which are separate from the consolidated Carnival’s statements) displayed the company’s successful effort of increasing its liquidity performance.
Current and Debt/Equity ratio show that company’s recent proportion of short/long term debt to assets is a lot more preferable to build stockholders’ and creditors’ confidence. IV. Conclusion Mergers and acquisitions has been companies’ tool of development. After achieving certain level of growth, a company starts to think about merger with its rivals or acquiring its vertically related parties. Overall purpose of the activity is to make one’s business stronger or just to gain company’s share of the market. Carnival and Princess is one of the most famous acquisitions in decades.
Both separate companies suffered from factors beyond their control and displayed immensely declining trend of performance. But performance reports in a year’s time since the acquisition elaborated that combination of the two, resulted amazing increase of consolidated company performance. Some believes that the amazing achievement was due to a strong market demand and some thought that it was due to the infant nature of the industry. But there are some who believe that it was carnival’s structure of good corporate governance that delivered success to the merger.
International acquisitions are known to be sources of corporate governance complications for decades. Without strong and open for improvements structure of corporate governance, the abundant benefits of the acquisition written on paper would be rather illusions and fictions.
Bibliography Ayer, Sanjay. 2005. “Carnival PLC ADR vs. Carnival Corp”. Morningstar [online]. Retrieved May 9, 2005 available at http://morningstar. aol. com/PoweredBy/doc/news/1,3496,128105,00. html? CN=NSC124 “Carnival”. 2005. BusinessWeek [online]. Retrieved May 3 2005 available at http://www. businessweek.com/bw50/2005/company/CCL. htm “Carnival CCL”. 2005.
Morningstar. com [online] retrieved May 9, 2005 available at http://quicktake. morningstar. com/Stock/search ‘Commission Decision’. 2003. The Commission of the European Communities [Online]. Retrieved May 9, 2005 available at http://europa. eu. int/smartapi/cgi/sga_doc? smartapi! celexapi! prod! CELEXnumdoc&lg=EN&numdoc=32003D0667&model=guichett Eidham, Michael. 2004. “How Shipshape is Carnival? ”. BusinesWeek [online]. Retrieved May 3, 2005 available at http://www. businessweek. com/bwdaily/dnflash/jul2004/nf2004078_4024_db014.