The banana producer,
Chiquita Brands International Inc.
) seems to have become the center of attention in the agribusiness
industry with another fruit company expressing interest in merging
with the company. Countering Chiquita's already agreed deal to buy
Irish rival Fyffes Plc, a partnership of Brazilian juice maker
Cutrale Group and investment firm Safra Group have proposed to buy
the former in an all cash transaction.
The Cutrale Group and the Safra Group have proposed to buy all of
Chiquita's shares for $13 per share, or about $611 million
excluding debt. This offer represents a 29% premium to Chiquita's
closing share price of $10.06 as of Aug 8, 2014.
Further, the private Brazilian companies displayed aggressive
buyout intent proposing to close the deal by end of the year,
following due diligence, almost maintaining the same time frame
when Chiquita is expected to complete its deal with Fyffes.
Following the news, we saw the markets acknowledging the Brazilian
partnership's proposal, sighting more value in it compared with the
company's previous tie-up with Fyffes. The shares of Chiquita shot
up over 30% to close above the offered bid at $13.10 per share.
While the Fyffes deal will help the company gain greater access to
the worldwide market becoming a leading distributor of banana and
other fresh produce, the new offer from the Brazilian firms will
provide Chiquita extensive industry expertise along with access to
significant financial resources.
Chiquita will cash from the Cutrale Group's global exposure in the
distribution of oranges, apples, peaches, lemons and soybeans along
with its extensive experience in fruit and juice value chain.
Moreover, the company will have access to significant financial
resources via Safra Group's over $200 billion assets under
management and a presence across North and South America, Europe,
the Middle East and Asia.
In the letter sent to Chiquita's management, Cutrale and Safra
stated two reasons for this being the right time to put forward its
bid. The first one being the recent dismissal of criminal charges
against Chiquita by a U.S. appeals court. Chiquita was sued by
thousands of Colombians who believed that the company financed the
paramilitary group who killed thousands of Colombians during the
conflict with guerrillas from the Revolutionary Armed Forces of
Colombia, or FARC. The second reason sighted the significant fall
in the company's share price since it signed the deal with Fyffes.
The Brazilian companies also indicated that backing out from the
Fyffes deal will be relatively inexpensive for Chiquita as it only
attracts payment of a $5 million breakup fee. Cutrale and Safra
have urged Chiquita to engage in talks by Friday, Aug 15, regarding
Chiquita responded to the buyout proposal by saying that it is
reviewing all aspects of the offer with its financial advisors to
determine an alternative in the best interest of its shareholders.
In Mar 2014, U.S. fruit firm Chiquita Brands had signed a
definitive agreement to buy Irish rival Fyffes Plc for about 379
million euros ($526 million). The combination of Chiquita and
Fyffes is expected to create the world's biggest supplier of
bananas. The deal is expected to close before the end of 2014
subject to the approval of Fyffes and Chiquita shareholders and the
High Court of Ireland. The combined company will be named as
ChiquitaFyffes Plc and will be listed on the New York Stock
Exchange and domiciled in Ireland.
Of late, Chiquita has been struggling with the supply and pricing
of its raw products. This Zacks Rank #5 (Strong Sell) company faced
a large oversupply of bananas in fourth-quarter 2013, which
negatively impacted the trading markets globally. In the salad
business too, Chiquita suffered from iceberg supply shortages in
the early fourth quarter and experienced an oversupply of raw salad
products later in the quarter as a result of harsh weather across
the growing regions.
Despite the challenges, the company's sales volume increased in
both the North American banana business and the retail packaged
salad business. The company also exited non-core, unprofitable
businesses in the year 2013 to remain profitable.
Other better-ranked food companies include Treehouse Foods Inc. (
), Boulder Brands Inc. (
) and Pinnacle Foods Inc. (
). While Treehouse Foods carries a Zacks Rank #1 (Strong Buy),
Boulder Brands and Pinnacle Foods hold a Zacks Rank #2 (Buy).
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