Fyffes may bid for rival fruit group

Fyffes has been cited as a possible buyer for Fresh Del Monte, the rival fruit firm that has reportedly been put up for sale.

The market has attached a price tag of about $1.8 billion (€1.5 billion) to the Cayman-based company, which Fyffes has looked at buying before. Analysts believe that Fyffes is almost certain to again examine a bid for Fresh Del Monte, but say a deal is far from guaranteed.

Online acquisition newsletter, TheDeal.com, reported late last week that Fresh Del Monte had recruited JP Morgan to advise it on an auction, with first-round bids due this week.

This speculation led on Friday to a firming in Fresh Del Monte's share price, which rose by more than 8 per cent in New York. This prompted the New York Stock Exchange to seek a public statement from Fresh Del Monte on the "unusual market activity" in its stock. Fresh Del Monte refused, saying "its policy is not to comment on unusual market activity or rumours".

Fyffes was equally silent yesterday, with a spokesman saying that the firm does not comment on market speculation. A spokeswoman from Fresh Del Monte did not respond to queries.

Fyffes shares were muted yesterday, falling by three cent to €2.30. This suggests investors were not overly excited by the Fresh Del Monte report. The stock was strong last week amid reaction to Fyffes's planned spin-off of its property assets into a new listed entity. In a note to clients yesterday, Merrion Stockbrokers analyst Robert Brisbourne said that if Fyffes were to acquire Fresh Del Monte, it might reconsider the spin-off and use the properties to raise cash instead.

The deal would, he pointed out, require Fyffes to leave behind its traditionally conservative balance sheet management - the company has more than €200 million in cash - and look at taking on a high level of gearing.

On an operational level, analysts point out that Fresh Del Monte, which has a heavy presence in pineapples, would allow Fyffes to diversify away from bananas. Some also believe, however, that the pineapple market is facing considerable pressures at the moment.

Those playing down an acquisition also point to Fresh Del Monte's current high valuation. It has also been suggested that Fyffes's decision to establish its new property company could, in fact, make the fruit firm a takeover target.

Fyffes will be in the news again tomorrow when the High Court delivers its verdict in the insider dealing case the firm took against DCC and its chief executive, Jim Flavin.