Wednesday 22 January 2020

Fyffes moves ahead with Chiquita merger plan despite rival offer

Fyffes and Chiquita had agreed to join up last March
Fyffes and Chiquita had agreed to join up last March

Donal O’Donovan

Fyffes is pushing ahead with its process to merge with Chiquita, despite this week’s shock rival bid for the US banana company.

Yesterday Irish fruit group Fyffes began posting proxy forms to shareholders – as well  a prospectus for the combined companies – ahead of a shareholder ballot called for September 17 to approve the deal.

In March Chiquita and Fyffes agreed to merge in a deal to create the world’s biggest banana supplier.

But on Monday that deal appeared to have hit the rocks, after Chiquita received a surprise $610.5m (€456m)  joint offer from Brazilian financier Safra and juicemaker Cutrale.

The Brazilian deal values Chiquita at 30pc more than the deal with Fyffes, and the US company has been given until tomorrow to respond.

On the markets investors are convinced the Safra deal blows the merger with Fyffes out of the water. They now think an even higher offer could be flushed out for Chiquita.

Shares in Chiquita were trading at $13.55 each yesterday, above the $13 a share being offered by Safra-Cutrale and far higher than the valuation implied by the Fyffes deal.

But Fyffes is pressing ahead with the merger process by sticking to a timetable to get shareholder approval for the tie-up agreed in March.

That deal is an effective merger of equals – shareholders in Chiquita will own 50.7pc of the combined business with the owners of Dublin Stock Exchange-listed Fyffes holding the balance.

And some analysts still see the agreed Fyffes-Chiquita deal  as the most likely to succeed because it offers clear long-term synergies and tax savings.

For investors that leaves the choice between a bird in that hand – in the shape of the higher offer – or Fyffes’ bird in the bush – in the shape of longer term returns.

“Shareholders would probably like the company to be auctioned. I think that would yield the best result,” said Sachin Shah, a strategist at Albert Fried.

“It’s up to the board to make sure that they literally shake the tree as much as possible to get the best offer.”

Fresh Del Monte Produce or even Tropicana orange juice owner PepsiCo could also join the bidding for the $629m company, Mr Shah said.

Chiquita said its board will review the offer from Cutrale and Safra and determine the best course of action.

The board of Chiquita has until tomorrow to react to the Cutrale–Safra approach,  but it’s not clear whether that has to be a definitive answer or if it could be the start of negotiations.

Enlarged

Fyffes executive chairman David McCann was 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.

With its favoured merger potentially off the agenda and the company in the spotlight,  an alernative tie-up or offer for Fyffes could also be in the works.

(Additional reporting Bloomberg)

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