US investment firms taking DCC to court

Two American investment management groups, Boston-based Putnam Asset Management and Denver-based Founders Asset Management, are suing DCC over the group's sale of its stake in Fyffes two years ago.

Both investment companies bought Fyffes shares from DCC subsidiary Lotus Green in February 2000. They bring to four the number of fund managers who have taken action against DCC. Two Irish-based institutions, Eagle Star and Hibernian Investment Managers, have already taken action, and these cases will depend on the outcome of Fyffes' own €85 million (£67 million) unlawful share-dealing action against DCC and its chief executive Mr Jim Flavin.

The two-year statute of limitations for bringing civil unlawful dealing cases has now expired and a source close to DCC said the four institutions involved represented a small proportion of the institutional investors who bought DCC's 31 million Fyffes shares in February 2000.

Fyffes announced its results for the year to the end of December yesterday, but deputy chairman Mr Carl McCann would not comment on the litigation against DCC, citing legal advice. The Fyffes High Court action against DCC is not expected to be heard for at least 18 months.

The Fyffes results for 2001 show a strong recovery from the very weak performance the previous year with pre-tax profits more than doubling to €63.5 million while earnings per share rose from 5.37 cents to 12.56 cents.

Fyffes benefited from a general improvement in trading conditions and the impact of a €20 million cost-cutting programme. Strong cash flow, lower capital expenditure and fewer acquisitions meant that Fyffes ended the year with net cash of €150 million, an increase of 72 per cent. The dividend has been increased 10 per cent to 4.73 cents per share.

Mr McCann insisted that the sharp rise in net cash did not reflect any lack of appetite for acquisitions: "We look at a lot of deals but we are careful to find good value for money." He would not comment on the possibility of a bid for American rival Chiquita which is currently under Chapter 11 bankruptcy protection.

He added that it was important for Fyffes to have plenty of cash. "It's getting harder to get capital. The bond and commercial paper market is closed to many companies and straight bank lending is harder to get. All of our competitors have debt and we have net cash so that leaves us well positioned," he said

Fyffes is planning further asset sales, including some substantial property interests in north Dublin and other properties in Dublin, Dundalk, Belfast and Edinburgh. Mr McCann said the timing of the sales would depend on market conditions, but added: "We would see about €35 million of value there."

Managing director Mr David McCann emphasised the 56 per cent increase in the Fyffes share price from its 52-week low from €0.80 to its current level around €1.25. But Fyffes' main competitors Dole and Del Monte have enjoyed 98 per cent and 206 per cent growth in the same period. ...

Deputy chairman Mr Carl McCann rejected the suggestion that Fyffes' comparatively low rating against its competitors made the company a potential bid target. "We're more likely to be an acquirer than be acquired," he said.

The McCann family owns just under 11 per cent of Fyffes while the group's management holds another 5 per cent of the company.