Monday 18 December 2017

Fyffes will get €23m payout if merger fails

Fyffes shareholders get worse terms

Fyffes Executive Chairman David McCann
Fyffes Executive Chairman David McCann
Sarah McCabe

Sarah McCabe

Fyffes shareholders have just gotten a lot warmer to the idea that its proposed merger with Chiquita might collapse.

A new deal forged between the two banana giants means Fyffes stands to rake in about two thirds its 2013 pre-tax profit if the merger falls apart.

A "break fee" clause included in the updated agreement means Chiquita will pay 3.5pc of its own market capital, - around €23m - to Dublin-based Fyffes in the event the deal collapses.

That's more than two thirds of Fyffes' pre-tax profit last year, €31m.

The clause was created to compensate Fyffes for the time and energy it is investing in the merger negotiations.

However, the new deal is far less lucrative for Fyffes' shareholders if the deal does go through.

Chiquita investors will now own 60pc of the combined business, compared with 51pc when deal was first announced.

The two changes weigh one another out, according to analysts.

"While the revised terms are more advantageous to Chiquita shareholders should the deal close, the increased break clause of the transaction value is material to Fyffes should it fail to do so," said Merrion Capital analyst David Holohan.

Chiquita first agreed to buy Fyffes in March in a deal that would create largest banana company. Based on their closing share prices on Thursday, the combined group, to be called ChiquitaFyffes, would be worth about $1.06bn.

But the merger was delayed last month when Brazilian firms Cutrale Group and Safra Group offered around $625 million to buy Chiquita.The new terms are an attempt to salvage the deal.

"The world has changed since March," said David McCann, Fyffes's executive chairman, referring to the counterbid from Cutrale-Safra. "We wanted to understand what was needed to get the deal done."

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