Fyffes, which in March announced a $1 billion merger with its US rival Chiquita, is forging ahead with plans to implement the deal, despite a rival takeover bid on Monday for Chiquita backed by Brazilian billionaire Joseph Safra.
Dublin-headquartered Fyffes, whose executive chairman is David McCann, yesterday sent letters to its shareholders containing documents shareholders must approve for its merger with the US firm to go through as planned this year.
It also confirmed to investors it still plans to hold two meetings of shareholders on September 17th to approve the original deal, which would see Fyffes take 49.3 per cent of the enlarged company and the top three management positions.
Analysts are split on whether the all-share merger with Fyffes or Monday's all-cash $611 million offer from Safra – in partnership with Florida fruit firm Cutrale – will prove more attractive for Chiquita's shareholders. Safra has asked it for a response by Friday, and analysts are speculating Fyffes will beunwilling to improve terms for Chiquita to ward off the Brazillian bid.
David Holohan, head of research at Merrion Capital, said yesterday Fyffes "can defend the original merger case. It does not have the financial capacity to launch a [rival] cash offer."
Fyffes’s share price plummeted 14 per cent on Monday afternoon after news of the Safra offer. It closed on the Iseq yesterday at 92 cents, near its level prior to the merger announcement in March, which attributed a value of €1.22 to Fyffes shares.
In a note yesterday from US investment bank BB&T Capital Markets, however, analysts Brett Hundley and Omar Mejias said they believe Chiquita "will reiterate its desire to complete the merger with Fyffes".
“We believe that [Chiquita’s board] finds greater incremental shareholder value from [the Fyffes]deal. There are seemingly more synergies involved on a combination with Fyffes . . .” they said.
However, the analysts noted if Safra raised its bid for Chiquita, “we would expect the board’s decision to become more difficult”.
Risk elements
Cutrale and Safra say their offer has more value for Chiquita and is less risky, a reference to the pressure in the US to prevent tax “inversion” deals. The merged Chiquita-Fyffes business was to have been tax-domiciled in Ireland for lower corporate tax rates.
People involved in the Safra deal say investors in the US group have turned against the Fyffes merger since it was announced as the terms are unfavourable. Another source of confidence is the Brazilians' ability to make an all-cash offer. Mr Safra has an estimated net worth of $16 billion. Fyffes did not comment when contacted yesterday. – (Additional reporting: Financial Times)
