Fyffes, the Dublin-headquartered banana distributor, and Chiquita, the US rival it proposes to merge with, are braced for a fresh attempt by two Brazillian billionaires to scupper the $1 billion merger with a cash offer for Chiquita.
Joseph Safra, a Brazilian banker, and Jose Luis Cutrale, an orange-juice magnate, are widely believed by market analysts to be planning a second, higher cash bid for Chiquita, which on Thursday rejected a $611 million bid made earlier in the week. The Fyffes merger valued Chiquita at about $526 million.
To have any chance of success, the Brazilians must make a fresh offer in time for it to be considered by Chiquita’s board in advance of September 17th, when Fyffes and Chiquita have scheduled shareholder meetings in Dublin and the US to rubber-stamp the proposed merger.
Chiquita said on Thursday night it is sticking with the Fyffes merger “at this time”.
If it completes as planned before the end of the year, Dublin-based Fyffes chairman David McCann will assume the role of chief executive of the largest banana company in the world.
Mr Cutrale and Mr Safra are "extremely disappointed" in the board's rejection, they said in a statement. "The Cutrale Group and the Safra Group are considering all alternatives to provide shareholders with the opportunity to send a clear message to the Chiquita board that they should enter into discussions regarding the Cutrale-Safra proposal."
Analysts believe the Brazilians have the firepower to push Fyffes, which is much smaller than its proposed merger partner, out of the picture. However, an auction for Chiquita could entice other bidders, such as Pepsico or Fresh Del Monte.
BB&T Capital, a US financial company, believes Cutrale and Safra will return soon with a higher cash offer, after their surprise $13-a-share bid was rejected this week.
"I think $15 gets the board's attention and potentially opens up a dialogue between the two companies," said analyst Brett Hundley.
The Brazilians are thought to be trying to capitalise on the recent hostile climate in the US towards so-called “tax inversion” deals, in which US companies buy foreign firms so they can move their headquarters abroad to save on corporation tax. ChiquitaFyffes is proposed to be based in Dublin. Mr Hundley, however, said inversion is probably only a minor factor in the merger, and the saving is estimated at only $5 million a year.
– (Additional reporting: Bloomberg/Reuters)