Wednesday 13 November 2019

From Belize to the boardroom: Total chief is out to grow €1bn firm's global footprint

Former Fyffes executive Rory Byrne tells John Mulligan that the fruit and vegetable distributor's share price has been undervalued but it is now likely to be on investors' radar

Rory Byrne, CEO of Total Produce, says he was surprised that Fyffes was sold
Rory Byrne, CEO of Total Produce, says he was surprised that Fyffes was sold
John Mulligan

John Mulligan

Rory Byrne was 28 years old when he was despatched to Belize. It was 1989, and for a young Irish executive the tiny central American country might as well have been on the moon.

He had just started working for fruit-distribution firm Fyffes, having been "plucked" from KPMG by Carl McCann, now Total Produce's executive chairman.

The aim of the Belize trip was to assess the banana industry there which, at the time, was "on its knees", according to Byrne, remembering daring-do jaunts to remote airstrips in the rainy season.

"David (McCann, then Fyffes' group managing director) asked me to go out to Belize for a month or two and just see what was happening," says Byrne, who has just been named one of two UCD Business Alumni of the Year for 2017. The other is Aer Lingus chief executive Stephen Kavanagh.

"I ended up working on a finance programme to regenerate the growers and meeting with the Belize prime minister.

"It's a small country, so it sounds grander than it was. But you look back on those kinds of experiences and it's hard to imagine them in many other Irish companies at the time."

Apart from Belize, he worked for Fyffes in Spain, Honduras, Guatemala, Chile, South Africa and the UK.

Having climbed his way up at Fyffes, Byrne (56) was named CEO of Total Produce when the Fyffes business was split. Total Produce was formally spun-out of Fyffes in 2007.

Total Produce's roots now extend across Europe, where it's the biggest fruit and vegetable distributor, to North America where it's been building up its business through acquisitions.

Last year, it spent €60m buying up stakes in other firms and has a presence in 26 countries.

Fyffes (one of the world's biggest banana distributors) and Total Produce have been linked to the McCann family for more than 60 years. Fyffes itself began life more than a century ago and had become a well-known brand in itself.

Fyffes was sold last year for €751m to Japan's Sumitomo group - a deal which followed two years after a failed merger between Fyffes and Chiquita. That romance was crashed when Brazil's Cutrale and Safra muscled in and whisked Chiquita from the dancefloor.

And despite the headlines that the Fyffes sale generated (the McCann family owned just under 12pc of the business, and have a similar shareholding in Total Produce), it's actually Total Produce that is the bigger company.

In 2015 - the last year for which full-year financial results for Fyffes published results before its takeover - it posted sales of more than €1.2bn and generated total adjusted earnings before interest, tax and amortisation (Ebitda) of €45.8m.

Last year, Total Produce had revenues of €3.7bn (doubled since 2007) and an adjusted Ebitda of €73.7m (almost twice the 2007 figure).

When the planned takeover of Fyffes by Sumitomo was announced last December, Total Produce shares shot up more than 8pc to about €1.97. They've pretty much hugged that number since, giving the company a market capitalisation of €631m. Sumitomo paid a 50pc premium to Fyffes' share price the day before the deal was unveiled.

"Something like the Sumitomo acquisition prompts people to examine the underlying financials associated with the Total Produce share price," says Byrne, speaking at the company's Dublin office in the capital's historic Victorian fruit and market heartland.

"People suddenly realised that this share price is significantly undervalued relative to peer groups of similar type industries," he adds.

Some executives try to brush off concern about share price performance but it does matter if you want to do an equity-fuelled takeover - or thwart a takeover. So did the Total Produce share price prior to the Fyffes takeover by the Japanese group frustrate him?

"I suppose it did," he admits. "Obviously, it's important to get the share price right. If we had very significant opportunity, you want to make sure you've got the right rating on your own shares to use paper to finance a deal, for example and the lower your share price, the more vulnerable you are to perhaps even an unwanted takeover bid. So, it's important to focus on it."

Going by the metrics used by Sumitomo to value Fyffes, Total Produce would now be worth in and around €1bn.

"Yeah, you could argue along that basis," Byrne agrees, stressing that no one's been sniffing around the company as far as he is aware.

"Obviously if someone decides to make a takeover bid, there is undoubtedly a takeover premium associated with doing that," he adds.

"If we can continue to make some interesting acquisitions, continue to focus on organic growth, continue to focus on leveraging the strengths of the group and continuing to develop our management team, I think putting all of those together there's no reason why we shouldn't be able to continue to move forward with the share price."

The top team at Total Produce is reasonably tight - four executive directors and four non-executives. Two non-execs, Rose Hynes and Jerome Kennedy, have been on the board since 2007.

Hynes is chairman of the Shannon Group, whose operations include Shannon Airport, and also the chairman of agri group Origin Enterprises, among other roles. Kennedy, a former KPMG managing partner, is also a non-executive director of INM, the publisher of this newspaper, and holds other non-executive directorships with companies including Green REIT.

DAA CEO Kevin Toland was appointed a non-exec at Total Produce in 2015, while Seamus Taffe (also a former KPMG senior partner) joined in 2012.

Total Produce insists in its annual report that Hynes and Kennedy remain independent despite the length of their tenure on the board.

"You'd be hard pushed to say neither of them were very independently minded people," says Byrne.

"I understand what corporate governance rules try to do, but in our business, as a board we feel it's very important that our directors have a very good understanding of the dynamics of our business. I think time and experience is of equal importance as an arbitrary measure a timeframe that determines whether or not somebody is independent," he says.

The legacy of Total Produce is obviously closely linked to Fyffes and the McCann family. Carl and David's father, Neil (who died in 2011), ran the business for years.

"I was lucky enough as well to have known the patriarch, Neil McCann, and he was just a wonderful, inspirational, charismatic guy," says Byrne. "You can see where Carl and David inherited those genes. The whole McCann family, they do a lot of impressive stuff that's under the radar."

Was he surprised that Fyffes was sold, nothwithstanding the fact the McCann family couldn't have blocked it anyway?

"At some level, and it's more on that emotional level, I was surprised that Fyffes would have been sold," says Byrne.

"These things happen. I think from a McCann family point of view, and knowing both Carl and David, they do have a huge affinity and loyalty for the business.

"I'm sure that much like myself, for them there's a huge emotional aspect to selling the business," he adds. "But the McCanns owned about 12pc of Fyffes and it wasn't a determining shareholding, so if someone wanted to come in and make an offer of 50pc over your share price, any public company would find it hard to resist that."

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