Chiquita Brands International’s future in Charlotte entered a new phase of uncertainty Friday as the company’s shareholders spurned its board of directors and voted down a planned merger with Irish produce company Fyffes.
After the vote, analysts said Chiquita was almost certain to accept a rival offer from two Brazilian companies to buy the banana and salad seller for $14.50 a share.
Shareholders ended seven months of corporate maneuvering between Chiquita and Dublin-based Fyffes in a meeting that lasted less than 10 minutes. The vote, announced at the meeting at Chiquita’s NASCAR Plaza headquarters, could potentially end Chiquita’s brief run as a Charlotte-based company.
While ChiquitaFyffes would have been based in Ireland, executives had promised most of the 320 or so workers in uptown Charlotte would remain. Executives at the privately held Brazilian orange juice-maker Cutrale and banking conglomerate Safra haven’t said what they would do with the headquarters and didn’t respond to questions Friday.
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Cutrale and Safra’s offer, totaling $680 million, is set to expire at 9 a.m. Monday. Chiquita’s board of directors went into a meeting to discuss the deal immediately after Friday’s shareholder session and did not comment beyond a brief statement from Chiquita CEO Ed Lonergan.
“Given today’s results, we have determined to terminate the agreement with Fyffes and to engage with Cutrale/Safra regarding its revised offer,” Lonergan said. “While we are convinced (Fyffes) would have been a strong merger partner, we will now go forward as competitors.”
Cutrale and Safra are private and controlled by two of the richest men in Brazil. Cutrale is one of the world’s largest makers and distributors of frozen orange juice concentrate. Jose Luis Cutrale Jr. controls the firm, which is a major source for Coca-Cola’s Minute Maid and Simply Orange Juice lines.
The Safra Group, which traces its roots to the Ottoman Empire, has about $200 billion of assets under management. The group’s banks and investment arms stretch from Brazil to the U.S. to Europe. The conglomerate is controlled by Joseph Safra, 75, who ranks No. 57 on the Forbes billionaire list with an estimated net worth of $15.2 billion.
Jonathan Feeney, principal with Athlos Research, said Cutrale and Safra could look for more aggressive cost savings than Chiquita and Fyffes would have.
“(A buyer) that is not emotionally connected to prior management, staffing, capital spending decisions ... could be expected to focus more on cost cutting,” he said.
Feeney said the Brazilian companies have little reason to divulge their plans, especially if they are likely to cause unease among employees or involve heavy cost cutting.
“They really have no incentive whatsoever to let us know what they think,” said Feeney.
No fanfare this time
Chiquita is a relative newcomer in Charlotte, arriving less than three years ago as an iconic brand recruited aggressively by local officials. Recruiters promised almost $23 million worth of state and local incentives to lure Chiquita from Cincinnati in 2011. The company also chose Charlotte for its busier airport, with more flights to reach Chiquita’s far-flung operations.
Chiquita’s arrival was greeted with fanfare in Charlotte: Then-N.C. Gov. Bev Perdue attended an exuberant news conference at the Charlotte Chamber, the Duke Energy Center was lit in Chiquita’s yellow and blue, and digital billboards went up around the city to spread the news.
Reaction to Friday’s news was decidedly quieter.
Chamber spokeswoman Natalie Dick said the group would not comment on Chiquita and declined to make anyone available for interviews. Charlotte Mayor Dan Clodfelter declined to comment via a spokeswoman and spokespeople for Charlotte, Mecklenburg County and the N.C. Department of Commerce also declined to comment.
After the Fyffes deal was proposed in March, city and county officials said they met with Chiquita to discuss what effect the deal would have on Charlotte. But they have not said whether they intend to seek repayment of the incentives money.
A condition of the incentives deal requires Chiquita to keep its global headquarters in Charlotte for 10 years or repay the incentives it has received. City and company officials have said Chiquita has so far met the job-creation targets required by the incentives.
Plans now unclear
Cutrale and Safra have been fighting to buy Chiquita for themselves since August, when they first made an unsolicited offer to buy Chiquita for $13 a share. Chiquita’s board of directors rejected the offer, saying it undervalued the company.
Cutrale and Safra then increased their bid to $14, which Chiquita also rejected. On Thursday, the Brazilians upped their bid to $14.50 a share in a final attempt to sway shareholders.
The Fyffes deal would have given Chiquita shareholders almost 60 percent of the combined company’s stock. The deal would have been structured as a so-called inversion, in which a U.S. company reincorporates abroad in a lower-tax country. A spate of such deals, many of them involving companies reincorporating in low-tax Ireland, have drawn political fire this year.
Analyst Brett Hundley of BB&T Capital Markets said in a note to clients after Friday’s vote that Chiquita probably doesn’t have any room to negotiate a higher price, with the Fyffes deal off the table. Chiquita’s stock rose to $14.16 a share Friday, almost to the Brazilian firm’s offer price, and analysts said it would probably sink sharply to its pre-deal price if the board rejected the offer.
While the Brazilians haven’t laid out their plans for Chiquita, one possibility could be selling the company’s Fresh Express salad business, said Feeney.
Chiquita purchased the bagged salad provider in 2005 for $855 million to diversify its products. But although salads brought in $967 million in 2013, almost a third of Chiquita’s revenue, the company has struggled to make its salads profitable. If new Brazilian owners were able to improve the salad business significantly, Feeney said they could spin it off and cover their costs.
“That could be worth most of what they paid for this business,” he said.
Under the terms of their agreement, Chiquita would owe Fyffes a breakup fee for terminating the deal equal to 3.5 percent of Chiquita’s market capitalization if it enters into another deal. At Cutrale and Safra’s offer price, that would translate to about $23 million.
Chiquita didn’t release the exact results of its shareholder vote Friday, and it wasn’t expected to do so for several days, until the votes have been certified. But analysts who follow the company said they expected it was close.
“We believed that Chiquita had the votes to go through with the Fyffes deal,” wrote Hundley, the BB&T analyst. He said Cutrale and Safra’s eleventh-hour offer of $14.50 likely pushed enough shareholders over the line.
“I was a little surprised by it,” said Feeney. “I really think it was tight. Both sides had some reason to be confident.”
“I thought the Fyffes transaction was superior,” he said. “But the shareholders have spoken.” Staff Writer Rick Rothacker contributed