Cruise giant P&O Princess succumbed to a near year-long takeover campaign today as it finally welcomed a bid from US rival Carnival which will make the Southampton liners Queen Elizabeth 2, Oriana and Aurora stablemates.

Cunard owner Carnival has been trying to break up P&O Princess's preferred merger with Royal Caribbean since it was unveiled last November.

Successive approaches were rebuffed but the US giant finally won over P&O Princess with a £3.5b offer to create a dual-listed company.

P&O Princess employs around 20,000 people worldwide and sails under the brands of Southampton based P&O Cruises, Swan Hellenic, Ocean Village as well as Princess Cruises.

Carnival which owns Cunard and operates the flagship QE2, is the world's biggest cruise operator.

But by withdrawing from the proposed merger with Royal Caribbean, P&O Princess will have to fork out a hefty £91.9m in costs.

To avoid paying Royal Caribbean any further penalties, P&O Princess can not recommend Carnival's offer to shareholders until January 1.

Should investors then back the deal, completion is expected in the first quarter of 2003 as European and US competition authorities have already given the deal clearance.

P&O chief executive Peter Ratcliffe said: "The industry is growing and I imagine there will many opportunities for staff so I don't think redundancies is going to be a significant story.'''