An influential shareholder advisory group changed its recommendation Monday on a proposed merger involving Charlotte-based Chiquita Brands International, endorsing a revised agreement with Dublin-based fruit company Fyffes.
A second advisory group that lobbied against the deal also said it will revisit its original recommendation and release a revised report before shareholders meet on Friday to vote in Charlotte.
Institutional Shareholder Services last month advised investors to reject the Charlotte company’s proposal to combine with Fyffes in an all-stock deal. The advisory group instead endorsed an all-cash offer from two Brazilian companies, orange juice maker Cutrale and banking conglomerate Safra. ISS cited the potential for “greater economic value” from the alternative deal.
Cutrale-Safra upped its offer to purchase Chiquita to $14 per share, or $658 million, last week after making an initial $13 per share bid in August. Chiquita’s board rejected the sweetened offer within a day.
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Instead, Chiquita took steps to make the Fyffes deal more attractive – efforts that swayed ISS and could persuade shareholders to vote for that deal over the Cutrale-Safra offer.
“We are pleased that ISS recognizes the increased value provided to Chiquita shareholders under our revised transaction with Fyffes,” Chiquita President Edward Lonergan said Monday in a statement.
In the revised Fyffes merger, which would create the world’s largest banana company, Chiquita shareholders are set to receive nearly 60 percent of stock in the combined company, ChiquitaFyffes. That’s up from 50 percent in the original agreement.
Maryland-based ISS said Monday that it now believes the Fyffes deal would yield more value to shareholders in the long run.
In the report, ISS projects the merged Chiquita and Fyffes would generate more than $300 million in earnings before interest, taxes and depreciation by 2016, increasing shares of the combined company to $14.90 per share.
California-based proxy firm Glass Lewis & Co. also said it will also release a revised report as early as Tuesday, after initially discouraging Chiquita shareholders from striking a deal with Fyffes.
“It doesn’t necessarily mean that we’ll change our recommendation,” said Warren Chen, head of merger and acquisition quantitative research at Glass Lewis. “Updates will include the new deal terms and our views on them.”
Cutrale-Safra has been vocal in its opposition to the possible Fyffes merger, going as far as accusing board members of deceiving and misleading shareholders about details of the proposed buyout.
One of the reasons Chiquita cited for rejecting the offer was uncertainty whether the deal will still be binding should the Fyffes merger be voted down. In a letter sent to Chiquita board members on Monday, Cutrale/Safra reiterated its promise to keep the offer on the table until two days after Friday’s vote.
Some shareholders still favor the Brazilian firms over a Fyffes merger. Wynnefield Capital, which owns 3.5 percent of Chiquita, endorsed the Cultrale/Safra deal, calling the Fyffes merger inferior and blasting Chiquita’s board members for “self-serving behavior” that “threatens significant harm to shareholders.”
Recommendations from proxy advisers can play a significant role in the outcomes of shareholder votes. Institutional investors seek the recommendations of proxy advisers on a range of issues, from mergers and acquisitions to executive compensation.
ChiquitaFyffes would be based in Dublin, although company executives have said most of the 320 workers Chiquita employs at its headquarters in Charlotte’s NASCAR Plaza would stay. The Brazilian companies have declined to comment on plans for the Charlotte headquarters.
Chiquita shares closed down 4 percent on Monday, at $12.80.