With Reuters Securities

Royal Caribbean Cruises (NYSE:RCL), controlled by the Israeli Ofer Brothers, said it is merging with P&O Princess Cruises (LSE:POC) to create the world's largest cruise vacation group.

The Ofer family also controls the Tel Aviv-listed companies Bank Mizrahi and Israel Corporation.

The combined group will have a fleet of 41 ships and some 75,000 berths. It will surpass in size the cruise outfit belonging to the Arison family, Carnival Cruise. The Arisons are also deeply invested in Israel, with holdings in Bank Hapoalim, Housing & Construction, and the Eurocom telecoms company.

The merged cruise company RCL-Princess cruise company will have annual revenue in the range of $5 billion. The companies expect the merger to lead to savings of $100 million a year on operating costs.

P&O Princess said that following the merger, its shareholders will own around 51% of the enlarged group, which will have a dual listed company structure. The new company will be headquartered in Miami, Florida.

P&O Princess shares surged 13 percent to 358 pence in pre-market trade. The stock had lost about a fifth of its value since the September 11 attacks on the United States. Royal Caribbean shares closed at $15.01 on Monday.

Cruise operators have been suffering since the attacks as many passengers cancelled trips, forced operators to lower fares to help win back passengers.