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Brazilian magnates luring Chiquita shareholders with hard cash

  • http://media.charlotteobserver.com/smedia/2014/08/07/18/34/G5Hvf.Em.138.jpeg|412
    Amy Sancetta - AP
    Chiquita Brands on Monday received an approximately $611 million buyout offer from investment firm Safra Group and agribusiness and juice company Cutrale Group.
  • http://media.charlotteobserver.com/smedia/2014/08/12/19/28/13vHZk.Em.138.jpeg|202
    Marcos Issa - BLOOMBERG FILE ART
    Cutrale is a major supplier of frozen concentrate and fresh orange juice, with juicing operations in Florida and Brazil, where workers inspect oranges on the production line at a Brazilian plant in 2010.

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Chiquita Brands International’s shareholders and board of directors are likely to find two Brazilian firms’ offer of $610 million cash hard to turn down, some analysts said Tuesday, as the companies try to break up Chiquita’s planned merger with Irish produce firm Fyffes.

The unsolicited bid from Brazil, first announced Monday, pits two of that country’s richest men against Fyffes, which plans to combine with Charlotte-based Chiquita in an all-stock deal by the end of the year.

The Brazilian companies that teamed up in their bids, Cutrale Group and Safra Group, are both privately held companies controlled by family scions with international business ties.

Cutrale, controlled by Jose Luise Cutrale Jr., is a major supplier of frozen concentrate and fresh orange juice, with juicing operations in Florida and Brazil.

Safra is an international conglomeration of banks and wealth management groups. Joseph Safra, who came with his family to Brazil from Lebanon after World War II, owns the company.

Although ChiquitaFyffes would be the world’s largest banana company, some analysts said Tuesday that the all-cash bid might be more compelling than a merger, which would give Chiquita shareholders just over 50 percent of the combined company’s equity.

“The Cutrale proposal may be deemed a superior offer given its cash terms, lack of financing contingency and the strength of Cutrale’s position in orange juice and other fruits,” wrote Kim Noland, director of high yield research, at independent corporate bond research firm Gimme Credit.

The upset bid creates more uncertainty for Charlotte.

Chiquita and Fyffes have said that though the combined company would be headquartered in Dublin, Ireland, most of Chiquita’s 320 corporate jobs in Charlotte would remain. Cutrale and Safra haven’t disclosed any plans for the Charlotte headquarters.

Chiquita has said its board of directors is considering the $13-per-share offer, which would give shareholders a 29 percent premium over the stock’s closing price. Chiquita’s stock closed at $13.39 a share Tuesday, up 2 percent.

Brett Hundley, an analyst with BB&T Capital Markets, wrote in a note to investors that he expects Chiquita’s board will initially stick with its plan to combine with Fyffes. The Fyffes deal already has a leadership structure and business plan sketched out, and the companies have started merger integration planning. But Cutrale and Safran could raise their bid, possibly to $15 a share, Hundley said.

And if the cash on the table were to grow, Hundley said the board’s decision would “become more difficult.”

Cutrale and Safra have asked Chiquita for a response by Friday. Chiquita has said it won’t comment publicly on the proposal until its board has made a decision.

The new companies angling to buy Charlotte-based Chiquita aren’t household names in the U.S., but they’re some of Brazil’s most prominent firms.

About Safra Group

The Safra Group traces its roots to the Ottoman Empire, when the Safra family began financing trade and currency exchanges in Aleppo, Syria. According to the company’s history, patriarch Jacob Safra and the family relocated to Beirut,, as their Middle East banking empire grew, then moved to Brazil.

“They’re one of the most prominent commercial families in Brazil,” said Jeffrey Lesser, an Emory University history professor who has studied Brazil’s immigrant business community. “They have branches all over the world.”

The Safra Group’s banks and investment groups stretch from Brazil to Europe to the U.S., where Safra owns the Barneys building on Madison Avenue in New York City and the Safra National Bank of New York. All told, the company has about $200 billion of assets under management.

It’s all controlled by Joseph Safra, 75. He’s No. 60 on the Forbes billionaire list, with an estimated net worth of $15.8 billion. Safra bought his brother’s 50 percent stake in the family business in 2006, according to media reports.

A third brother, Edmond Safra, died in 1999 in what was ruled an arson attack on his Monte Carlo penthouse. His American nurse, Ted Maher, was convicted of the crime but later proclaimed his innocence following his release from prison.

About Cutrale Group

Cutrale, Safra’s partner in the Chiquita bid, is another closely held company controlled by the son of its founder.

The firm is one of the leading orange juice suppliers worldwide, and a major source for Coca-Cola’s Minute Maid and Simply Orange Juice lines. Cutrale bought two Minute Maid orange juice processing plants in Florida in 1996, which it continues to operate.

The Brazilian company has tangled with American regulators and unions. After buying the Minute Maid plants, Cutrale found itself in a bitter dispute with the Teamsters union over layoffs and wage and benefit cuts.

The Teamsters accused Cutrale of letting the plants deteriorate and eventually went on strike to protest. The company and the Teamsters came to a new labor agreement after a six-week strike, according to media reports at the time.

“There is no further comment on a topic that is now well over a decade old,” said Cutrale spokeswoman Stefanie Goodsell.

And from 2006 to 2011, Brazilian orange juice, including that made by Cutrale, was under an anti-dumping order in the U.S. Such orders impose protectionist tariffs when regulators determine that foreign companies are selling goods in the U.S. for less than they cost to produce, in order to hurt American companies.

Brazil and the U.S. formally ended their dispute over orange juice import prices in 2013.

Portillo: 704-358-5041; Twitter: @ESPortillo
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