Chiquita shareholders face an intensifying lobbying campaign
08/27/2014 10:07 AM
08/27/2014 6:25 PM
Shareholders of Charlotte-based Chiquita Brands International are at the center of an intensifying lobbying campaign that could determine the future of the iconic banana company.
Chiquita is fighting to win approval for its upcoming merger with Irish produce company Fyffes. At the same time, two Brazilian companies are seeking to block the deal in favor of their own buyout offer.
Chiquita and Fyffes on Wednesday upped the estimate of how much their merger will save by $20 million. The company didn’t say whether any of the additional savings would come from job cuts in Charlotte, where Chiquita employs more than 300 people uptown.
Chiquita also sent a letter to its shareholders urging them to vote in favor of the Fyffes deal, saying the Brazilian companies’ offer undervalues the company.
Meanwhile, Cutrale, an orange-juice maker, and the Safra Group, a banking conglomerate, are appealing directly to Chiquita shareholders to block the Fyffes deal. On Tuesday, they made a presentation to Institutional Shareholder Services, an influential advisory group that recommends how to vote on shareholder proposals, trying to win ISS support.
Both groups are maneuvering ahead of a Sept. 17 meeting in Charlotte at which Chiquita shareholders are set to vote. They’ll have to choose between an all-stock combination of Chiquita and Fyffes and an unsolicited $13-a-share, $611 million bid by Cutrale and Safra. Chiquita’s board rejected the Brazilians’ bid two weeks ago.
“The Cutrale/Safra offer, in our judgment, is not a compelling alternative to ChiquitaFyffes as it limits the ability of Chiquita shareholders to realize long-term value and the offer itself is opportunistic, at a low premium and a low multiple off a weak point in the stock price,” Chiquita said in its shareholder letter. “Chiquita is in the midst of a turnaround initiated by new management and is also about to close on a merger that would create a leading global produce company.”
Cutrale and Safra shot back with a letter of their own Wednesday, ratcheting up the war of words. The Brazilian companies said Chiquita’s arguments “defy credibility” and “are highly misleading.”
“The Chiquita-Fyffes announcement that they suddenly have discovered an additional $20 million of alleged synergies for their proposed business combination, just weeks before the Chiquita shareholder vote, not only smacks of desperation but, more importantly, we believe underscores the irresponsibility and lack of judgment of the Chiquita board,” Cutrale and Safra wrote.
ChiquitaFyffes, the combined company, could save $60 million a year by merging their operations, the companies said Wednesday. That’s up from an earlier estimate of $40 million in annual savings.
If Chiquita and Fyffes can cut their costs by an additional $20 million, that could make the deal more attractive to Chiquita shareholders, who would get just over 50 percent of the combined ChiquitaFyffes stock. The company says ChiquitaFyffes’ shareholders’ stock would likely be worth more than the $13 per share offered by Cutrale and Safra.
Chiquita moved to Charlotte from Cincinnati two years ago, lured in part by almost $22 million worth of state and local incentives tied to job creation.
Fyffes and Chiquita would move the headquarters of the combined company to Ireland, although the companies have previously said most of the corporate jobs in Charlotte would remain.
Finding more savings
Chiquita said Wednesday it had discovered the $20 million more in potential savings while planning with Fyffes about how to combine the two companies. Much of the savings is expected to come from more efficient shipping and sourcing by the two companies, moving bananas and other produce to the Mediterranean and European markets.
The rest is expected to come from “information technology efficiencies due to the implementation of cloud computing,” Chiquita said. Spokesman Ed Loyd could not immediately be reached for comment on the potential impact to Charlotte.
Separately, Chiquita also said it expects to achieve additional savings of $14 million to $16 million by using larger ships to move its bananas in the Gulf of Mexico and sharing the extra capacity with other shipping partners.
“Chiquita and Fyffes remain committed to the transaction and are continuing to work together to complete the combination as expeditiously as possible,” said Chiquita CEO Ed Lonergan in a statement. If they get shareholder approval, the companies could complete their merger in October.
Lonergan also criticized the Brazilian firms’ offer, saying the proposal “does not provide compelling value as compared to the combination with Fyffes.”
Moving the headquarters to Ireland offers potential future tax savings. Although Chiquita has said that’s not a primary driver of the combination, Cutrale and Safra have said the ChiquitaFyffes deal could be blocked amid a rising wave of political opposition to such “inversion” deals.
ChiquitaFyffes would have annual revenues of almost $4.2 billion, and would be the world’s largest banana company.
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