Banana merger or banana split?

Corporate doublespeak is a curious old language, all the same. As far as takeover rejections go, Chiquita's supposed rebuff of Safra Bank and Cutrale's $611 million bid this week was as about as hard as a marshmallow.

Chiquita officially said "No" to the $13 a share offer that would wreck its proposed merger with Fyffes. In reality, it was probably saying: "Yes, we're interested, provided you show us more money."

Chiquita's description of the Safra-Cutrale bid as "inadequate" clearly implied that it is just the quantum, as opposed to the existence, of the bid that is being rejected and thus a higher offer has a good chance of success.

The almost apologetic conclusion that Chiquita cannot hold talks with the new bidders “at this time” also clearly implies that it would be prepared to hold talks at another time if circumstances, namely the price of the bid, were to change.

After September 17th, however, it will be a different story. Shareholders of both Fyffes and Chiquita will hold meetings that day to approve the terms of the proposed merger, as outlined in the S-4 document filed with the Securities and Exchange Commission.

The S-4 also outlines the sanctions that would apply to either company if the merger were to collapse between September 17th and the date set for closing. The financial penalties are insignificant – transaction costs and a negligible break fee – but the document is clear that anything from either party that could be construed as encouraging a bid from a third party after ratification could have serious consequences.

The smart money is a cash auction for Chiquita and that’s a game Fyffes can’t play. It is only a bit more than half the size of its American bride. And if the wedding is called off, it will be interesting to see if Fyffes looks for another partner.