Carnival's P&O bid receives boost as Shearman steps in

A public legal opinion from the firm helped persuade shareholders of P&O to postpone their Valentine's Day vote on the P&O-Royal Caribbean merger in order to consider further the Carnival bid.
The opinion indicated that shareholders could postpone without giving Royal Caribbean a legal excuse to pull out or triggering the payment of a $6.25m (£4.4m) break fee. Shearmans' US-qualified partner Alberto Luzarraga collaborated with UK lawyer Adrian Knight to draft the opinion, the first to be used in the UK to allay shareholders' merger fears.
On the advice of Herbert Smith and US firm Paul Weiss Rifkind Wharton & Garrison, Carnival has always maintained that an adjournment of the vote was possible under the New York law merger contract. But P&O maintained publicly the opposite to some effect. Carnival's investment banks UBS Warburg and Merrill Lynch faced constant questioning from institutional owners of P&O shares.
The banks and Carnival general counsel Arnaldo Perez decided to seek a further, more independent legal opinion to present to the P&O shareholders. Many of the top US firms were considered, but Shearmans benefited from a longstanding personal relationship between Perez and Paris partner Manuel Orrillack. Luzarraga said Shearmans' London profile was key, because the banks wanted a firm that could appeal to London-based institutional shareholders.
Carnival has increased its bid to 550p per share, a factor that was no doubt paramount in investors' minds. However, Shearmans' opinion offered comfort to the investors, in that they could hang on to Royal Caribbean while further assessing problematic areas of the Carnival deal, such as antitrust clearance.
Luzarraga said: "I think it really helped. It eliminated the risk that Royal Caribbean could walk away. Certainly, if it hadn't been publicised, Carnival may have had to offer the shareholders a lot more cash to offset that risk."