How ‘very enjoyable meal’ in Dublin led to €751m deal for Fyffes
Deal will net €87.5m for McCann family as high price tempts Fyffes board to sell
Fyffes chairman David McCann: “This is a good transaction for our shareholders and for our people, as we expect the business as a whole to remain intact.” Photograph: Dara Mac Dónaill
Two months ago, David McCann was invited to dinner at the Merrion Hotel in Dublin by Japanese conglomerate Sumitomo Corporation. “We had a very, very enjoyable meal,” McCann told The Irish Times yesterday, declining to give details of what the small group of executives dined on.
The final bill, it emerged yesterday morning, came to €751 million, as McCann, executive chairman behind Fyffes, agreed that the world’s oldest banana brand would be gobbled up by a corporate gorilla with a €15 billion market value.
“When discussions like this begin, you can never predict how they’re going to finish,” said McCann (58), “but this is a good transaction for our shareholders and for our people, as we expect the business as a whole to remain intact.”
The deal is a far cry from when McCann’s grandfather, Charles, set up a greengrocers on Clanbrassil Street in Dundalk in 1902 to become the first agent in Ireland for Fyffes, the then fledgling London-based banana importer.
In the 1950s, the McCanns brought a fragmented group of fruit wholesalers and distributors together under the United Fruit Importers of Ireland. It ultimately ended up being floated on the Irish Stock Exchange as FII plc in 1981 before going on to acquire Fyffes five years later from US rival Chiquita.
More recently, David McCann failed in a high-profile bid to win the hand of Chiquita two years ago in what would have been a $1 billion deal. The target was ultimately bought by Brazilian juice maker Grupo Cutrale and investment firm Safra Group, leaving the former Irish lawyer to ponder his next move.
“There weren’t many people that thought the McCanns would be willing to sell,” said David Holohan, chief investment officer at Merrion Capital in Dublin, “but the premium that was offered by Sumitomo was so high, management had to have a look at it very seriously.”
The €2.23 per share cash offer values Fyffes at 49 per cent above its closing prices on Thursday and 37 per cent above its all-time peak of €1.62 reached in April. In addition, Fyffes shareholders will be paid a final dividend of 2 cent.
“The deal values Fyffes at roughly 15.9 times 2017 expected earnings, a slight premium to the average valuation of sector peers,” said David Donnelly, an analyst with Cantor Fitzgerald.
The McCann family, who own 11.8 per cent of the group through their Balkan Investment vehicle, stand to make €87.5 million, while a trust linked to the South Carolina-based Jewish-American Zucker family, who emerged on the shareholder register earlier this decade, are set to make a similar amount.
Three months ago, the McCanns were out buying shares in Fyffes in the market as they sought to minimise the dilution of their stake as the company raised €47 million through a share placement to bolster its balance sheet and carry out more deals, after spending almost €140 million this year buying two Canadian mushroom companies.
The purchase of the Highline Products and All Seasons mushrooms businesses gave Fyffes another string to its bow, beyond bananas, melons and pineapples. While the company has raised its earnings forecasts a few times following the Canadian deals, it highlighted in September that its oldest business, bananas, was grappling with “challenging” trading conditions as the dollar strengthened against the euro.
McCann, who said he has given Sumitomo a commitment that he will “stay for a period”, sees the Japanese giving Fyffes the leeway to continue to develop, even if detailed conversations on this have yet to happen.
Sumitomo, with 65,000 employees across 800 companies involved in everything from energy to an investment in a Japanese shopping channel, has been in the banana industry since the 1960s. It currently imports 30 per cent of the fruit into its domestic market.
Hirohiko Imura, a managing executive officer at Sumitomo, said his company “will provide Fyffes with experience, support and investment to continue” to grow. The group said it intended to work with Fyffes management to move into different geographies and “accelerate the execution of its strategy”.
“Today is a stepping stone in a history of many companies, including my family’s,” McCann said. “All of those have combined to create something special.”