Donal O’Donovan, Published: 09/09/2014
Banana producers Fyffes and Chiquita have delayed shareholder meetings that were originally planned for next week and where both companies were due to seek shareholder approval for their proposed merger.
The meetings are being postponded to allow Chiquita time to hold talks with a rival buyer.
Irish banana producer Fyffes said yesterday that it granted Chiquita the time to talk to the alternative bid team following a request from the US company.
The waiver allows Chiquita to engage in discussions with juice maker Cutrale and investment firm Safra Group regarding their joint $611m (€472m) takeover approach for the US company.
Last month Chiquita rejected the surprise offer from Cutrale and Safra, both based in Brazil, saying it would stick with plans to merger with Fyffes that were announced as far back as March this year.
The Fyffes/Chiquita combination will create the world’s biggest banana producer with combined sales of 16 billion bananas a year.
However, an unsolicited joint offer from Cutrale and Safra for Chiquita values the US business at a third more than the Fyffes deal.
After initially rejecting the approach, Chiquita has now written to the Brazilian bidders, confirming it is willing to hear a new offer.
It needed the OK from Fyffes because the two firms have already agreed merger terms and are working through a timetable towards completing the deal.
But allowing the negotiations with Cutrale and Safra to go ahead increases the chances that a deal with Chiquita could slip away from Fyffes.
In a statement Fyffes said it was seeking adjournments of shareholder meetings that had been scheduled for September 17, pencilling them in for October 3 instead. Chiquita is also postponing a shareholder vote that had been due to happen on September 17.
Despite putting the breaks on, at least temporarily, the boards of both Fyffes and Chiquita said they continue to recommend a merger to each of their respective sets fo shareholders.
Fyffes shares fell 1.5pc to 94.5 cents each in Dublin, following the announcement.
Chiquita shares were up 1.3pc at $13.95 each in New York in early trading – well above the $13 a share offered by Cutrale and Safra in their original opening bid.
On Friday Institutional Investor Services, an influential firm that advises shareholders on how to vote in company ballots recommended that Chiquita, shareholders should reject the Fyffes merger deal and pursue a sale to Cutrale and Safra.
However, Merrion Capital analyst David Holohan said yesterday that the merger plan still makes sense.
“We continue to believe that the Fyffes/Chiquita combination is highly attractive and would require a bid of in excess of $16 per share from Cutrale-Safra to match the economics of the merger,” he said.
Merrion Capital has a “buy” recommendation on Fyffes shares.
Fyffes and Chiquita have claimed that merging the two companies will create pre-tax cost synergies of $60m – with savings in areas ranging from shipping and logistics to information technology.
Half of the expected savings would be achievable in the first year following the closing of the merger, with the remaining secured by the end of the second year, they said.
The European Commission’s competition arm is currently mulling the implications of the proposed merger of Fyffes and Chiquita and is expected to make a decision on whether to grant approval on September 19.
In half year results published on August 28 Fyffes said it had incurred €8.3m in exceptional charges related to professional fees and related costs in connection with the proposed merger.
The three-way tussle over the future of Chiquita is becoming heated.
Cutrale/Safra has questioned the savings to be achieved by merging Chiquita and Fyffes and claimed taking time to examine its offer represents a “riskless option” for shareholders.