Mark Paul, Sep, 03, 2014, 07:22

Firms strongly defend their prospective merger from Brazilian rivals Safra-Cutrale

Employees sort bananas at Fyffes Plc’s ripening and fruit distribution plant in Coventry, UK. Photographer: Simon Dawson/BloombergEmployees sort bananas at Fyffes Plc’s ripening and fruit distribution plant in Coventry, UK. Photographer: Simon Dawson/Bloomberg

Fyffes, the Dublin-headquartered banana company, and US company Chiquita, its prospective $1 billion merger partner, hit back in a co-ordinated move last night against two Brazilian billionaires who are trying to scupper their union to create the world’s biggest banana group.

Both companies released strongly worded presentations defending their prospective merger and attacking their Brazilian opponents, setting the scene for an extraordinary battle later this month for the hearts and minds of investors over a rival cash bid for Chiquita by Joseph Safra and Jose Luis Cutrale.

The Safra-Cutrale all-cash bid for the US company is contingent upon Chiquita abandoning its prospective merger with Fyffes to create ChiquitaFyffes, which would be run by Fyffes’ chief executive David McCann, headquartered in Dublin, and listed in New York.

After Chiquita’s board rejected the cash bid to stick with the Fyffes merger, the Brazilians last week appealed to Chiquita shareholders to defeat the merger in a vote at a rubber-stamp meeting on September 17th, and instead force Chiquita’s board to engage with the cash bidders.

Fyffes is due to hold a simultaneous shareholder meeting to confirm the merger, but the Irish company’s board last night told shareholders they could seek an adjournment “until the outcome of Chiquita’s meeting is known”.

Fyffes, which also released details yesterday of an updated 2014 profit forecast of €38 million and €42 million, posted yesterday to shareholders a 23-page call-to-arms about what it says is a “compelling” merger.

It outlined the company’s earnings and revenue growth over several years, in reply to a previous statement by Cutrale-Safra that questioned the merger’s promised cost savings and the ability of Mr McCann and his proposed management team to deliver them.


Rebuts assertions

Fyffes directly rebutted Safra-Cutrale’s assertions that Fyffes is “run by a lawyer, has no integration experience, is a vulnerable middleman” and that there is “no risk” to the Brazilian approach.

The Irish company outlined its management team’s track record, and warned that the merger can be terminated by either Fyffes or Chiquita if the deal is not approved by the end of the September 17th meetings.

Chiquita’s presentation to its shareholders is particularly strongly worded, vowing to “set the record straight” about Safra-Cutrale’s bid, which it says is “dug in” at $13 a share, although analysts believe it could yet go higher. Chiquita claimed Cutrale-Safra “grossly misrepresents” Fyffes’ track record,

“grossly overstates” the alleged financial advantages of the rival cash bid, and “grossly understates” the value of the ChiquitaFyffes merger.

Chiquita said its shareholders had the choice between “a better company, with greater potential to create value for shareholders” and “no deal”. It said the Brazilians had the opportunity to come back with a higher bid, but chose not to.

Chiquita also invited its shareholders to “maintain the option of entertaining offers for the combined company, at the right price”. The Brazilians, however, have previously indicated they have no interest in acquiring the Fyffes business.

Mr Safra has extensive banking interests, while Mr Cutrale runs a huge orange juice company, which would have significant synergies with Chiquita’s mainly US operations.