Charlotte-based Chiquita Brands International and Irish produce company Fyffes have sweetened the terms of their proposed merger for Chiquita shareholders in an attempt to win support for the embattled deal.
But a rival group trying to buy Chiquita fired back, accusing the companies of “trying to hoodwink Chiquita investors” and saying their deal offers shareholders more value.
The all-stock proposal from Chiquita and Fyffes is the latest twist in a merger drama that started in March, when the two companies announced plans to combine and form the world’s largest banana company.
Under their revised agreement, the companies said Friday that Chiquita shareholders will get almost 60 percent of the stock in the combined company, ChiquitaFyffes. That’s up from just over 50 percent in the previous agreement.
“We are pleased with the increased value that these enhanced terms for Chiquita bring our shareholders,” Chiquita CEO Ed Lonergan said in a statement.
Chiquita shareholders had been scheduled to vote on the Fyffes deal next Friday in Charlotte. Now, that vote has been pushed back to Oct. 24 to give shareholders time to consider the new offer, Chiquita said.
The combined company would be based in Dublin. Company executives have said most of the 320 workers Chiquita employs at its headquarters in Charlotte’s NASCAR Plaza would stay.
Chiquita was lured to Charlotte in 2011 with about $22 million worth of state and local incentives tied to the company’s job creation. State and local officials haven’t said what would happen to the incentives if the iconic banana producer moves to Ireland.
Chiquita is under pressure from two Brazilian companies, orange juice maker Cutrale and banking conglomerate the Safra Group, who are trying to buy the company themselves for $611 million cash. They’re soliciting shareholders to vote against the ChiquitaFyffes deal.
Jonathan Feeney, principal at Pennsylvania-based Athlos Research, said the revised agreement announced Friday by Chiquita and Fyffes offers Chiquita shareholders almost 20 percent more value for their shares than under the previous agreement.
“That inherently sweetens the pot. It certainly helps,” Feeney said. If the combined company is able to save money by combining operations, ChiquitaFyffes could be worth $20 a share – more than the Brazilians’ $13 per share offer – within a few years, Feeney said.
Cutrale and Safra are negotiating with Chiquita about a possible new offer, but have not yet made one. Cutrale and Safra said they expect to submit their own revised offer “as expeditiously as possible.”
They blasted Chiquita and Fyffes for revising their offer without notifying Cutrale-Safra beforehand, and before the companies submitted their own revised offer.
“The board’s action plan ... will do nothing more than cost the Chiquita shareholders money,” the companies said in a statement.
Feeney said the Brazilian companies will have to raise their offer to give Chiquita shareholders a decent premium over the stock’s current price if they hope to win.
“I don’t think we’ve heard the last from Cutrale and Safra,” he said.
Brett Hundley, a Richmond, Va.-based analyst with BB&T Capital Markets, said the Brazilian companies’ current offer is now clearly outmatched.
“For Chiquita shareholders, $13-$15 from (Cutrale-Safra) can no longer be an option. It shouldn’t be,” he wrote in a note to investors. “We now think Cutrale-Safra must up its bid to an appropriate level, in order to win this asset. We think an appropriate level is in the high teens now.”
Chiquita would still be a good value for Cutrale and Safra at $16 or $17 a share, Hundley said.
ChiquitaFyffes would create the largest banana company, leapfrogging competitor Dole.
“The world has changed since March,” David McCann, Fyffes’s executive chairman, told the Wall Street Journal. He was discussing the rival bid from Cutrale-Safra. “We wanted to understand what was needed to get the deal done.”
There are other changes to the proposed all-stock combination. If Chiquita can’t win shareholder support on Oct. 24, Fyffes is entitled to walk away. And if Chiquita enters into any other deals after that within nine months, the company would have to pay Fyffes a breakup fee.
That breakup fee has increased as well, from 1 percent to 3.5 percent of Chiquita’s total value of issued share capital.
Chiquita’s stock rose 2 percent Friday, closing at $14.34 a share.