August 11, 2014

2 Brazilian firms bidding to buy Chiquita

Investment firm Safra Group and juice maker Cutrale Group are offering to buy Chiquita for $610.6 million in cash, casting doubt on the fruit giant’s planned merger with an Irish competitor and raising more questions about the future of its Charlotte headquarters.

Two Brazilian companies on Monday offered to buy Chiquita Brands International, casting doubt on the fruit giant’s planned merger with an Irish competitor and raising more questions about the future of its Charlotte headquarters.

Investment firm Safra Group and juice maker Cutrale Group are offering to buy Chiquita for $610.6 million in cash, according to a statement issued by the companies.

The bid could upset Chiquita’s plans to combine with Dublin-based Fyffes in an all-stock deal by the end of the year, creating the world’s largest banana company. Chiquita shares surged on Monday’s news, closing up 30 percent at $13.11.

“Investors are either willing to scrap the Fyffes deal, trading the stock above $13 per share, or are looking for a sweetener from Fyffes,” said Kim Noland, a research director at Gimme Credit, an independent research service on corporate bonds.

The counteroffer brings fresh uncertainty to Charlotte’s dealings with Chiquita over incentives money and the size of the firm’s Charlotte footprint.

Chiquita agreed in 2011 to move its headquarters to Charlotte from Cincinnati, a development local leaders called a major economic win. Lured by $22 million in state and local incentives, the firm brought hundreds of well-paid employees and its familiar blue logo to its new home at the NASCAR Plaza office tower on South Caldwell Street.

Fyffes has said it will keep most of those jobs in Charlotte. The Brazilian companies haven’t made their plans for those jobs clear.

The two Brazilian companies would pay $13 in cash per Chiquita share, a premium of 29 percent to Chiquita’s closing share price of $10.06 on Friday. Safra and Cutrale sent the proposal in a letter to Kerrii Anderson, chairwoman of the Chiquita board, and Ed Lonergan, Chiquita’s chief executive officer.

“Together, we are confident that this transaction offers compelling and more certain value for Chiquita shareholders as compared with the proposed transaction with Fyffes PLC and significantly enhances Chiquita’s business potential,” the letter states, requesting a reply by Friday at noon.

The new deal could close by year’s end, the same time frame as the proposed Fyffes transaction, the letter said. Chiquita and Fyffes have set Sept. 17 meetings for shareholders of both companies to vote on the $1 billion deal.

The letter was signed by Michael Rubinoff, a former Bank of America dealmaker who started working for Safra in April 2012 after a leadership change in the Charlotte bank’s corporate and investment banking group.

Chiquita confirmed Monday afternoon that it had received the offer. The company said in a statement that its board would “carefully review and consider the offer to determine the course of action that it believes is in the best interests of the company and its shareholders.”

In a letter to employees, Lonergan reiterated that point but added: “We continue to strongly believe in the strategic merits and value provided by the proposed transaction with Fyffes PLC.”

Fyffes had no comment, a spokesman said.

Cutrale Group, based in Araraquara, Brazil, bills itself as one of the world’s leading orange juice processors, with a global network of farms and business operations that include an array of fruits as well as soybeans.

Safra Group, headquartered in Sao Paulo, is controlled by Joseph Safra, a Brazilian banking tycoon ranked No. 60 on Forbes’ list of the world’s richest billionaires. It operates banks and oversees investments across the Americas, Europe, the Middle East and Asia.

In arguing that they make a better fit with Chiquita, the two firms touted Cutrale’s fruit business knowledge and Safra’s “deep, long-term relationships with major market participants.”

It wasn’t immediately clear where Chiquita’s headquarters operation would be housed if it is bought by the Brazilian firms, or whether those firms would leave any Chiquita employees in Charlotte.

If the deal with Fyffes comes together, The combined ChiquitaFyffes company would be headquartered in Dublin and led by Fyffes CEO David McCann. Most of the company’s 320 corporate jobs in Charlotte would likely remain, executives have said.

Incentives in question

Chiquita has been struggling to improve its results. The company earned profits of $18 million in the second quarter, down 42 percent from the same quarter last year.

Chiquita assigned much of the blame to dry weather, which hurt production on the company’s banana farms in Costa Rica, Panama, northern Guatemala and Honduras. Chiquita had to buy more bananas than usual on the expensive banana spot market to make up the shortfall.

Lonergan, the Chiquita CEO, said this month that the decision to merge with Fyffes and base the company’s headquarters in Dublin wasn’t fueled by tax savings, defending the company against a wave of political opposition to “inversions.”

One unresolved issue locally with Chiquita is what Charlotte and Mecklenburg County will do about their share of the $22 million worth of state and local incentives used to lure Chiquita’s headquarters away from Cincinnati in 2011. The incentives deal called for Chiquita to keep its headquarters in Charlotte for at least 10 years or repay the incentives.

Lonergan left the door open to repayment in May, saying, “We don’t want anything we don’t deserve.” Spokesman Ed Loyd said this month that Lonergan’s words still stand, and the company is continuing to negotiate with government officials about the incentives.

So far, the city and county have paid Chiquita $510,000 each, totaling more than $1 million. They’re scheduled to pay the fruit company about $1.5 million more in coming years.

The rest of the incentives money is from the state. More than $16 million, equal to 75 percent of the company’s estimated state income tax withholding for the new jobs, will be paid over 11 years. The state also agreed to give Chiquita $2.5 million to match the city and county money.

Chiquita has so far met its hiring targets to receive incentives money.

In March, Mecklenburg economic development chief John Allen suggested that what matters most is the location of the jobs and investment, as opposed to the headquarters.

Commissioners Chairman Trevor Fuller said Monday that he believed the initial discussions between the city and county indicated the money didn’t need to be repaid.

However, he said, the final form of the Chiquita Fyffes merger could still affect that determination. He said he didn’t know enough about the Brazilian companies’ bid to comment on what that might mean for local incentives.

Charlotte Deputy City Manager Ron Kimble said in an email that the city is “still in conversations” with Chiquita about the incentives but that no decision had been made.

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