Fyffes sues DCC over timing of major share sale

Two of the State's most closely aligned companies are set for an unprecedented High Court battle over the sale of shares weeks…

Two of the State's most closely aligned companies are set for an unprecedented High Court battle over the sale of shares weeks ahead of a profit warning.

Fruit importers Fyffes claims DCC chief executive Mr Jim Flavin and his company were aware of crucial price-sensitive information when they sold 10.2 per cent of Fyffes two years ago, at the height of the dotcom boom.

Mr Flavin told The Irish Times that he is is baffled at the High Court action, and will vigorously contest the claim.

Fyffes has instigated what is the first civil action for alleged insider dealing just one week before the statute of limitations for the action expired and is understood to be claiming about €85 million (#67 million) from DCC - the profit it is thought to have made from the sale of the 31 million shares two years ago.

READ MORE

Fyffes would only confirm that it has instituted the proceedings against DCC, Mr Flavin and Lotus Green - the subsidiary used to hold DCC's stake in Fyffes. Mr Flavin was a non-executive director of Fyffes for 20 years, but resigned from the board shortly after DCC sold the shares.

In a detailed statement to the Stock Exchange, DCC said it viewed the legal action from Fyffes with "incredulity" and that the action will be "vigorously and comprehensively challenged".

DCC has already stated that it received a query from the Stock Exchange in September 2000 about the share sales and had replied to that query. A spokesman for the company said it is aware "from media reports" that the Garda Bureau of Fraud Investigation had conducted inquiries into alleged insider dealing, but said the company itself had received no approach from the bureau.

The next stage in the proceedings will be on Monday, when Fyffes submits a detailed statement of claim to the High Court. But legal sources say that given the complexity of the issues and the likelihood of both parties seeking discovery of documents, the case is unlikely to be heard by the High Court for at least one and a half years.

The origins of the case date from December 1999 when Fyffes announced plans to set up an internet portal, worldoffruit.com, for the fresh produce industry. This was at the peak of the dotcom boom and had the effect of driving Fyffes shares from €1.60 before the announcement to a high of €4.00 in February 2000. The subsequent collapse in the dotcom sector, trading weakness and profit warnings devastated Fyffes shares, and they fell to as low as €0.68 in November 2000.

But in January 2000, with Fyffes shares rising rapidly, DCC received approaches from stockbrokers on a possible sale of the Fyffes shares it had held ever since the fruit company floated in 1981. The shares were sold in three tranches at prices between €3.20 and €3.90 in February 2000 to institutional investors - mainly from the UK.

A month later, Fyffes shares began to weaken as the dotcom bubble began to burst and trading difficulties hit the firm. In effect, Fyffes is claiming that DCC was aware of these problems before it sold its shares, and that this constituted insider dealing.

DCC for its part has said it had no knowledge of these factors before selling the shares. DCC is also claiming that Fyffes directors encouraged DCC to sell its remaining shares after the first tranche was sold on February 3rd 2000, and that Fyffes executives gave detailed presentations to institutional investors before and after the sale of the first tranche without revealing any negative price-sensitive information to the market.

A source close to Fyffes said last night that the company's statement of claim would deal in detail with the statements by DCC in its statement to the Stock Exchange.

Stock Exchange Statements issued by Fyffes and DCC: