August 15, 2014

Brazilian companies launch proxy fight to acquire Chiquita

Two Brazilian companies are taking their effort to acquire Charlotte-based Chiquita Brands International directly to shareholders, as they launched a proxy battle Friday to gather shareholder support for their bid.

Two Brazilian companies are taking their effort to acquire Charlotte-based Chiquita Brands International directly to shareholders, as they launched a proxy battle Friday to gather shareholder support for their bid.

Cutrale and Safra Group are trying to pre-empt Chiquita’s upcoming merger with Fyffes, an all-stock deal that would create the world’s largest banana company. Chiquita has called a special meeting Sept. 17 for shareholders to vote on the Fyffes deal.

On Monday, the Brazilian companies made an unsolicited upset bid to acquire Chiquita for $611 million. Chiquita’s board of directors on Thursday voted unanimously to reject the deal and stick with Fyffes.

In a securities filing late Friday, Cutrale and Safra urged shareholders to vote against a combination of Chiquita and Fyffes.

“We believe that a vote ‘against’ the Fyffes transaction proposal will send a message to the Chiquita board of directors that Chiquita shareholders do not support the proposed Fyffes combination,” the companies wrote in their message to shareholders.

The board’s failure to enter into talks with Cutrale-Safra and its rejection of the rival proposal continues its “track record of failed strategic decisions and shareholder value destruction,” the companies wrote.

Chiquita spokesman Ed Loyd could not immediately be reached late Friday.

Chiquita and Fyffes, a Dublin-based produce company, first announced their deal in March. The combination would propel Chiquita, which has struggled to grow and stay profitable, past rival Dole and stabilize its business. The combined firm would be called ChiquitaFyffes and headquartered in Dublin, though officials have said most of the 320 corporate jobs in Charlotte would remain.

Chiquita has found itself caught up in the recent controversy surrounding so-called “inversion” deals, in which U.S. companies reincorporate abroad for a lower corporate tax rate. Chiquita has said Ireland’s lower tax rate isn’t driving the Fyffes deal, but the combined company could benefit.

The companies have said their deal is on track to close by the end of the year. But Cutrale, an orange juice maker, and Safra, an international banking conglomerate, disrupted those plans with their offer to buy Chiquita outright for $13 a share. That’s a 29 percent premium over Chiquita’s closing stock price the day before the offer.

The offer from Cutrale and Safra, both privately held companies with a secretive reputation, presents Chiquita’s shareholders with two very different visions for the company’s future. Under the Fyffes merger plan, the companies would attempt to save $40 million a year by combining operations. Chiquita shareholders would receive just over 50 percent of the merged company’s stock.

The Brazilian offer, on the other hand, would allow shareholders to simply cash out. While Chiquita’s board has said the Fyffes deal offers more value in the long run, Cutrale and Safra claim their buyout plan offers shareholders a quicker payout with less risk.

Some analysts have speculated Cutrale and Safra might raise their offer higher than $13 a share in order to close the deal with Chiquita. The company’s stock closed at $13.63, up 12 cents, on Friday, indicating some investors think there’s a good possibility of a higher offer.

Friday’s filing by Cutrale and Safra also shows the Brazilian companies didn’t give Chiquita executives much time to respond before taking their proposal public. Cutrale and Safra began talking with each other about acquiring Chiquita in the spring. But Michael Rubinoff, a former Bank of America dealmaker working for Safra, didn’t reach out to Chiquita CEO Ed Lonergan and Chairwoman Kerrii Anderson until Monday morning.

Rubinoff called both but wasn’t able to reach them. “Following the telephone calls, Mr. Rubinoff emailed both Ms. Anderson and Mr. Lonergan the letter which sets forth the Cutrale-Safra Proposal,” the Brazilian companies wrote. They issued a press release with their offer shortly after 9 a.m. Monday.

If Cutrale and Safra get enough votes to break up the Fyffes deal, the Brazilian companies plan to adjourn the Chiquita shareholder meeting and pursue their acquisition.

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