Banana battle enters a critical phase

Many observers expected José Luis Cutrale and Joseph Safra, the Brazilian billionaires trying to stop the $1 billion merger between Fyffes and Chiquita in favour of their cash bid for the US company, to come back with a higher offer after the initial rejection from Chiquita's board. But Safra-Cutrale haven't. Instead, they have raised the rhetoric.

Chiquita and Fyffes on Monday issued presentations strongly defending the terms of the proposed merger, and attacked Safra-Cutrale’s rationale for directly soliciting Chiquita’s shareholders to reject the union at a rubber stamp meeting scheduled for September 17th.

Last night, the Brazilians hit back. They said the dual presentations were “evidence of Chiquita’s fear” its shareholders will defy the board at the meeting, by rejecting the merger and asking the directors to negotiate with the Brazilians.

Fyffes’ and Chiquita’s management, they argued, were “ignoring facts” about the respective merits of the two deals on offer to Chiquita, and dismissed the merger’s estimated $60 million cost savings as “speculative”. Safra-Cutrale then turned their guns on Dublin-headquartered Fyffes, which on Monday appeared to suggest that it could walk away if Chiquita adjourns the September 17th meeting to talk to the Brazilians.

“This is a scare tactic that is wholly unrealistic,” said Safra-Cutrale, who added it would be “illogical” for Fyffes to leave the table now.

Time may have already run out for a higher bid from the Brazilians, who promised they could wrap up a deal in October. It would be almost impossible at this stage for them to complete due diligence in the time available.

Both sides seem dug in, content to let shareholders decide at the September 17th meetings. For all concerned, that is a risky strategy.

It may sound bananas, but what chance of a grand bargain, whereby all three parties explore a Brazilian bid for a combined Chiquita-Fyffes? The US company appeared to float the idea, ever so subtly, in its Monday presentation.

A fruity prospect . . .