Princess May Bid for Celebrity

Princess Cruises may jump into the takeover battle for Celebrity Cruise Lines Inc. as the world’s biggest carriers jostle for top berth in the consolidating industry.

Last week, Carnival Corp. announced a $525-million bid for Celebrity, topping the company’s planned $500-million transaction with Royal Caribbean Cruises Ltd.

Although there is no official confirmation, industry experts then said Los Angeles-based Princess, backed by powerful shipping parent Peninsular & Oriental Steam Navigation Co., has to be considering its own bid for Celebrity.

Princess “is a profitable cruise line and there are only three profitable cruise lines in the industry,” said Jill Krutick of Smith Barney, who views Princess as a potential bidder.

Although unprofitable, Celebrity is considered to be valuable for its strong market presence in Bermuda. The cruise line, which now operates four ships, also sails throughout Alaska, the Caribbean and the Panama Canal.

Wall Street analysts said Princess would be reluctant to sit back and watch its two biggest competitors fight over Celebrity, which is jointly owned by Overseas Shipholding Group Inc. and privately held Chandris Group.

“They could very well get involved. I don’t think it is at all beyond the realm of possibility,” said one industry expert who asked not to be identified.

Princess and P&O; declined to comment on the speculation.

So far, Celebrity is sticking by its deal to join with Royal Caribbean. The company has acknowledged Carnival’s rival bid, saying only it would notify Carnival if interested.

Although the cruise business is booming, lingering concerns about weak fare pricing and overcapacity have triggered consolidation and most experts believe more will follow.

Walt Disney Co. plans to enter the market next year with a cartoon-themed “Disney Magic” vessel.

Carnival is the world’s largest cruise company, followed by Royal Caribbean, which is closely trailed by Princess.

In the Los Angeles area, Princess employs about 1,000 people, and the company estimates that it generates about $100 million in economic benefits for the region.

Carnival recently completed an acquisition of Italian cruise line Costa Crociere in a joint bid with British group Airtours.

In publicly announcing its bid, Carnival disclosed that it had held talks with Celebrity in the past, and offered Celebrity $510 million just six days after it struck the June 17 deal with Royal Caribbean.

Princess operates nine cruise ships worldwide and plans to bring the world’s biggest cruise ship into service next spring. The Grand Princess, being built by Italian shipbuilder Fincantieri, will include five pools and a nine-hole putting green.