Year a long time in banana business
Failed Chiquita deal seems to have done Fyffes’s shareholders a favour
The aborted tie-up with Chiquita originally valued Fyffes at €1.22 a share. Yesterday, Fyffes share price closed at €1.49. Photograph: Simon Dawson/Bloomberg
What a difference a year makes. This week in 2014, the management and board of Fyffes were sitting around waiting for shareholders of US rival Chiquita to vote on their proposed $1 billion merger, which would have created the world’s biggest banana company.
The Chiquita shareholders defied their board and rejected the deal, opting instead for a tie-up with Cutrale, a Brazillian-backed juice company. Fyffes was spurned, along with its executive chairman David McCann, who was to have led the merged company.
When the deal collapsed, it appeared to be bad news for Fyffes. McCann, however, let it be known that it was business as usual and the Irish company would keep doing what it had always done: investing conservatively, growing steadily.
No panic, he counselled.
McCann was right. The aborted tie-up with Chiquita originally valued Fyffes at €1.22 a share, although its share price fell back to about 94 cent after the deal collapsed last October. Yesterday, Fyffes share price closed at €1.49. It broke back through the €1 mark shortly after last Christmas and hasn’t looked back since, rising more than 50 per cent since the merger fell at the final hurdle.
Cutrale appears to have done Fyffes’ shareholders a favour.
The deal with Chiquita would have given Fyffes more muscle in the US market, where it is targeting future growth.
Its announcement this week that it will spend €30 million increasing its melon capacity there, as well as spending another $15 million on a Costa Rican banana plantation, shows growth in the the US is still firmly on McCann’s mind.
This brings risks, however. Companies in the US are legally precluded from doing business with companies with links to drug barons.
The speed with which Fyffes cut ties this week with a Belize banana farm that appears to be linked to a man so designated by US authorities shows McCann will take no risks with its US business.
Fyffes, as McCann predicted, will probably just keep doing what it has always done. Unless, of course, it becomes a takeover target itself. With so little debt on its balance sheet, it must surely be attractive to one of its rivals.