Chiquita backs Fyffes bid in fight for banana market giant
FYFFES has scored a major victory in the battle to merge with banana giant Chiquita after shareholders rejected a rival bid for the US firm.
Fyffes and Chiquita agreed merger terms last March but on Monday the Brazilian duo of Safra and Cutrale made a rival bid for Chiquita that seemed to dwarf the Fyffes offer.
The Chiquita board however has thrown its weight behind the Fyffes deal.
In a statement, Chiquita said Safra and Cutrale's bid of $13 a share was "inadequate and not in the best interests of Chiquita shareholders". Instead, the board "remains committed to completing its transaction with Fyffes", they said.
The news is a filip to Fyffes, which was seen as out of the running after the Brazilians made their offer.
When the rival bid was made public Fyffes shares fell by as much as 21pc, dropping back below the price before Fyffes announced the deal with Chiquita.
Safra and Cutrale are now considering their options.
In a joint statement, the two firms said they were "disappointed" by the rejection of their bid.
"The [Chiquita board's] decision is a continuation of its track record of shareholder value destruction.
"Accordingly, the Cutrale Group and the Safra Group are considering all alternatives to provide shareholders with the opportunity to send a clear message to the Chiquita Board that they should enter into discussions regarding the Cutrale/Safra proposal," they said.
While the Brazilian offer is seen as being much higher in cash terms, analysts at BB&T Capital in Virginia said the tax benefits and potential savings across the two companies meant the Fyffes merger offer was more valuable to Chiquita as things stand.
However, if Safra and Cutrale were to up their offer to something in the region of $15 a share, then that would make the Chiquita board's decision "more difficult", said BB&T's Brett Hundley.
Markets were in a holding position on Friday, unsure how to respond to Chiquita's move.
Fyffes shares rose 1.7pc to 93c, while Chiquita moved up marginally to $13.60 - well above the level of Safra and Cutrale's bid.
As well as being important to Fyffes as a group, the deal would also be a huge gain for a number of the Irish firm's management.
Fyffes executive chairman David McCann is set to become chief executive of the enlarged company while Fyffes' executives Tom Murphy and Coen Bos were to become finance director and chief operating officer respectively.
The combined companies would have annual revenue of more than €3bn in annual sales and would have about 29pc of the global banana market, making it the world's biggest player in the industry.
If the Fyffes bid ultimately fails, it may leave the Irish company in a state of limbo.
Companies such as US giant Dole - which has about 26pc of the global banana market - may at least run the rule over Fyffes at some stage but instead Mr McCann may turn his attention to pursuing a merger with sister company Total Produce. Total Produce was spun out of Fyffes in 2007 but rumours that the two companies may come together again have persisted for years.
Fyffes was once owned by the conglomerate United Fruit, which eventually became Chiquita.