If the new owners of Chiquita Brands International want to move the company’s 300-plus headquarters jobs out of North Carolina, they should be prepared to give back state and local incentive money, the head of the N.C. Economic Development board said Monday.
Cutrale and Safra Group, two Brazilian companies, announced their $680 million cash purchase of Chiquita on Monday, ending a long-running corporate tug-of-war in which Chiquita tried to spurn the Brazilian firms in favor of a combination with Irish produce company Fyffes.
John Lassiter, a former Charlotte City Council member who heads the state jobs board, told the Observer the new owners will inherit Chiquita’s responsibilities under the 2011 deal that brought the banana producer’s headquarters to Charlotte.
Under that agreement, Chiquita received more than $23 million in state and local incentives for moving its headquarters and hundreds of high-paying jobs from Cincinnati.
The deal with the city of Charlotte and Mecklenburg County says that if Chiquita moves its global headquarters from Charlotte within 10 years, it must repay the incentives it has received – a so-called “clawback” provision.
Asked if the Brazilian companies would need to repay incentives should they move the headquarters jobs, Lassiter replied: “It’s not a question of opinion. It’s ‘What does the agreement say?’ I would expect both the city (of Charlotte) to impress its position (on the new owners) and for the (new ownership) to follow expectations under its provisions of the agreement.”
Cutrale, an orange juice maker, and Safra Group, a banking conglomerate, will pay $14.50 per share for Chiquita, which employs about 320 workers on six floors of uptown’s 20-story NASCAR Plaza tower. The deal is valued at $1.3 billion if Chiquita’s debt is included.
Chiquita CEO Ed Lonergan, who had championed the Fyffes merger, said in a statement that he was pleased with the “substantial value” delivered to shareholders under the deal.
The companies said that after the acquisition, which is expected to close by the end of the year or in early 2015, Chiquita will be a wholly owned subsidiary of Cutrale and Safra. The company will retain its New Jersey incorporation, but Cutrale and Safra have not said what they plan to do with the company’s Charlotte headquarters.
The city of Charlotte and Mecklenburg County have so far paid Chiquita at least $510,000 each in incentives, for a total of more than $1 million. They are scheduled to pay the fruit company about $1.5 million in coming years.
The city and county issued a joint statement Monday afternoon saying they will study the deal with the Brazilian companies to see how it might affect Charlotte.
“It is premature to state with any certainty what the local impact may be,” the statement said.
Asked about the deal, Michael Barnes, head of City Council’s economic development committee, replied: “I don’t yet know what it means. I hope the new company will retain the jobs and its presence in Charlotte. There were clawbacks in the agreement, and if we need to exercise them, we will do that.”
In the 2011 negotiations, the state, city and county also agreed to pay Chiquita about $5 million to help cover the company’s moving expenses – a decision local officials called unprecedented at the time.
Now the council’s economic development committee is considering tweaking its approach to incentives, Barnes said, hoping “to make sure these deals are what we expect them to be, that they produce the amount of jobs they’re supposed to and that those jobs stay in Charlotte.”
The Chiquita deal commits the state to supply more than $16 million in incentives, equal to an estimated 75 percent of the company’s state income tax withholding for the new jobs. That money was set to be paid over 11 years.
For 2012, the first full year of its deal, Chiquita was paid $543,368 through the Job Development Investment Grant program, N.C. Department of Commerce spokeswoman Kim Genardo said. The company received slightly more than $1 million that year through another state job-recruitment program, the One North Carolina Fund.
Asked if the state will seek repayment should the Chiquita jobs leave, Genardo noted that the state’s job-recruitment programs also have clawback provisions.
The company exceeded its job creation goal for 2012 by creating 281 jobs and retaining 13, she said. She added that she couldn’t supply Chiquita’s numbers for 2013 because the state’s annual report on grant recipients isn’t complete for that year.
The 2013 grant award hasn’t been paid to Chiquita yet. Asked if that payment will be frozen pending the new owners’ decision on what to do with the Charlotte jobs, Genardo said via email that that remains “to be determined.”
Answers scarce on HQ
This spring, as he pursued the Fyffes deal, Chiquita’s Lonergan had left open the possibility that the company would repay some of the incentives if the headquarters moved to Ireland as then planned.
On Monday, officials representing Chiquita and the Brazilian firms didn’t clear up questions about the fate of the Charlotte jobs.
Chiquita spokesman Ed Loyd said the company “will be working over the next months to ensure a smooth execution (of the deal), and will be continuing to communicate and work with local officials as more details become available.”
He added that Chiquita and the Brazilian firms “are in complementary businesses,” and the Brazilians are confident that Chiquita can grow its business “and benefit its stakeholders, including employees, business partners, customers, distributors and suppliers.”
A Q&A distributed to employees didn’t directly answer a question about what would become of the Chiquita name, brand, and where its main offices would be. Such details “will be determined at the appropriate time,” the document said.
The new ownership said Chiquita’s workers helped make the deal attractive.
“We recognize that Chiquita’s strengths include a highly talented and engaged team of employees in Charlotte,” Madisen Obiedo, a New York-based spokeswoman for Cutrale-Safra, said in a statement.
Analysts have expressed skepticism about what the deal will mean for Chiquita and its operations in Charlotte.
BB&T capital markets analyst Brett Hundley called it “a win” for shareholders in a recent note to investors, but added that “it’s a loss for (Chiquita) the company.”
Wealthy new owners
Local and state politicians gave Chiquita an exuberant greeting when it arrived in Charlotte three years ago. Now the company whose familiar yellow and blue logo sits atop its home at the NASCAR Plaza tower becomes part of the private empires overseen by two of Brazil’s richest men.
Jose Luis Cutrale Jr., 68, controls one of the world’s largest makers and distributors of frozen orange juice concentrate. The firm 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.
In addition to Brazil, Cutrale has extensive operations in Florida, where the company operates frozen concentrated orange juice plants, and Safra has bank and real estate holdings in New York.