Fyffes-Chiquita deal still expected

The planned merger of Fyffes with its US banana-producing rival, Chiquita Brands is still widely expected to succeed, with one analyst suggesting a deal could be concluded earlier than anticipated by the end of October.

Fyffes and Chiquita announced plans in March to create the world’s largest banana supplier.

However, on Monday those plans were thrown into jeopardy — and Fyffes’ share price was sent tumbling by over 20% — by news of a rival unsolicited $611m (€458m) bid for Chiquita by Brazilian juice-maker Cutrale, backed by Brazilian investment firm, Safra.

It had been hoped that the formation of Chiquita- Fyffes would be concluded by the end of this year.

Both firms are due to hold EGMs next month to seek shareholder approval (with Fyffes posting registration forms to investors yesterday).

Fyffes share price was more stable, yesterday, hovering around the 92c, the point to which it fell on Monday, on the back of analysts still seeming to favour it, rather than a Brazilian takeover of Chiquita.

“As Cutrale/Safra have asked for a response by Friday, our expectation is that the company [Chiquita] will reiterate its desire to complete the merger with Fyffes,” said analysts at US firm, BB&T Capital Markets.

“We believe that regulatory bodies will find in favour of the Chiquita/Fyffes deal, and could do so as early as October,” they said.

Significantly, BB&T’s agri-business and consumer foods analysts — Brett Hundley and Omar Mejias — said that they don’t think any potential new US tax inversion laws would sideline or materially impair the merger’s value, “as related tax synergies are expected to be low”.

The proposed $4.6bn Chiquita-Fyffes entity would be domiciled here.

BB&T said it has continued to recommend Chiquita shares to investors based on the proposed Fyffes merger, saying it believes value creation from it is strong.

“We believe that Chiquita’s management agrees with us; hence it’s doing the deal in the first place,” it said.

The US brokerage is forecasting the merger will create around $40m worth of synergies and nearly $300m in combined earnings.

“We also believe that Chiquita-Fyffes could sell its US packaged salads business and pay down its heavy debt load,” BB&T said.

Chiquita said that while it retains its strong belief in the “strategic merits and value” of the Fyffes deal, which has already cleared a number of regulatory hurdles, it would carefully review and consider this week’s additional offer.

Goodbody Stockbrokers’ Patrick Higgins said: “We await the detailed assessment of Chiquitas board to establish if the Cutrale/Safra offer is as persuasive as it initially appears.”