What happens next Where's my refund? Best CD rates this month Shop and save 🤑
BUSINESS
Fyffes

Chiquita shares fall ahead of key investor vote

Kevin McCoy
USA TODAY
File photo shows bunches of Chiquita brand bananas for sale at a grocery store in Zelienople, Pa. in Sept. 2014.

Shares of Chiquita Brands International (CQB) closed down sharply Monday after a major institutional investor in the banana market giant said it would not back Chiquita's plan to buy Ireland-based rival Fyffes.

Wynnefield Capital, which owns 3.5% of Chiquita, instead endorsed the $14-a-share revised offer for Chiquita announced last week by the Cutrale Group and Safra Group, a team of Brazil-based corporate suitors pursuing an unsolicited Chiquita takeover bid.

Chiquita shares closed down nearly 4.2% at $12.80 in Monday trading — despite newly announced support for its Fyffes acquisition plan from an influential shareholder advisory organization.

Wynnefield's announcement came after Chiquita on Thursday rejected the latest Cutrale-Safra offer and reaffirmed its plan to buy Fyffes in a deal aimed at creating the world's largest banana company.

"In our analysis, the Cutrale-Safra Group proposal provides clearly superior shareholder value to the Fyffes transaction, and the Chiquita Board's self-serving behavior threatens significant harm to shareholders," said Wynnefield President Nelson Obus in a written statement.

He projected that Chiquita shares would fall by $2 to $2.50 if the Fyffes transaction won approval during this Friday's scheduled vote by the company's shareholders.

"In contrast, Wynnefield's analysis demonstrates that the all-cash Cutrale-Safra proposal would provide superior value and eliminate the risks associated with a merger. And, as a company analyzed on a cash-flow basis, rather than an earnings per share (EPS) basis, Chiquita Brands would be a better company for all stakeholders as a private enterprise," said Wynnefield.

In response, Chiquita reiterated its Thursday statement in which the firm said the Fyffes deal would enable investors "to realize significantly greater value than $14.00 per share, without losing any control premium that shareholders may receive in the future."

There are no assurances the Cutrale-Safra offer would remain available if shareholders reject the Fyffes transaction, the Chiquita statement also cautioned.

The company on Monday welcomed news that Institutional Shareholder Services had reversed course and advised its clients to vote in favor of the Fyffes transaction.

ISS had recommended against Chiquita's $526 million deal for Fyffes last month, citing a decline in market enthusiasm for the deal at that time. But the shareholder group said a recent revision that sweetened the Fyffes purchase plan for Chiquita investors gave the transaction an edge over the definitive takeover bid announced last week by Cutrale-Safra.

The shareholder group said the takeover team's offer — up $1 per share from an initial bid — "does not provide sufficient compensation to Chiquita shareholder to warrant giving up on the potential upside of the revised Fyffe's transaction" after an approved merger.

ISS also said there did not appear to be any "credible evidence" Chiquita's board had failed to act in shareholders' best interest.

Charlotte, N.C.-based Chiquita initially announced its plan to buy Fyffes in March. The company structured the transaction as a so-called corporate tax inversion — a procedure that would enable Chiquita to reap the future benefit of Ireland's lower corporate taxes by reincorporating in Dublin.

But the Obama administration on Sept. 22 announced new Department of the Treasury rules that would make corporate inversions less profitable and more difficult to complete. The rules, which took effect as of the announcement date, were aimed at closing what Treasury Secretary Jacob Lew called a "glaring loophole in the U.S. tax code" that enables U.S. companies to switch their citizenship to avoid paying future U.S. taxes.


Featured Weekly Ad