Difficulties for fruit sector ‘well known’

A FINANCIAL markets consultant has told the High Court that information available to DCC plc chief executive Jim Flavin prior to the €106 million sale of the DCC stake in Fyffes in early 2000 would not have materially affected the price of the shares had it been generally available at that time.

Frank O'Brien said he had examined the information available to Mr Flavin, which information Fyffes alleges to be "price sensitive". That information was contained in Fyffes' management accounts for November 1999 and the fruit distributor's trading report for December 1999, both of which documents were made available to Mr Flavin in January 2000.

He had concluded, based on his examination of those documents and of other material from generally available sources, that the difficulties of the international fruit sector in late 1999/early 2000 were well known and that their implications for Fyffes' trading and profitability were generally available. Information that banana trading was difficult in this period and that the implications for Fyffes' profits were poor was generally available, he had concluded.

He had also concluded that the stock market was in the grip of "a mania" (in relation to dot.com stocks) that ignored investment fundamentals.

Mr O'Brien, called as a witness for DCC, was beginning his evidence on the 75th day of proceedings by Fyffes alleging insider dealing in connection with the €106 million sale of the DCC stake in Fyffes over three days in February 2000.

The action is against DCC plc, Mr Flavin and two DCC subsidiaries S and L Investments Ltd and Lotus Green Ltd. The defendants deny the claims and plead the share sales were properly organised by Lotus Green, a Dutch-registered subsidiary to which beneficial ownership of the Fyffes' shareholding was transferred by DCC and

S and L in 1995 in order to avoid the payment of capital gains tax on any subsequent sale of the shareholding.

The hearing of the proceedings resumed yesterday after a two-week adjournment necessitated by Ms Justice Mary Laffoy being on circuit in Limerick. Evidence in the case is expected to conclude on Friday. Yesterday, Mr O'Brien told Michael Cush SC, for DCC, he had some 40 years' experience of investment markets and had prepared, at the request of solicitors for DCC, an expert report relating to the claims by Fyffes in this case.

A former senior investment analyst and senior fund manager with Irish Life, he said he later set up his own business and was an executive director of Investment Faculty Ireland Ltd and Frank O'Brien Investment Strategies Ltd. He had examined the international produce sector in 1999/2000 and noted that in the second quarter of 1999, stockbroking analysts began to reverse their earlier optimism about the trading background for the major players in the banana trade. He had compiled a selection of analysts comments through to December 1999 which showed the weakness in banana pricing persisted to the end of 1999.

The impact on profitability of weak banana prices was exacerbated by the strength of the dollar.

The hearing continues.