One heated battle may have drawn to an end this morning, but another is just warming up.
As the voters in Scotland were heading to the polls yesterday, the fight for the future of US banana importer Chiquita was escalating across the Atlantic after the rivals of Ireland’s Fyffes criticised the “desperate” attempts to save the Fyffes-Chiquita merger.
Earlier in the week, Fyffes filed an investor presentation with the SEC in New York which laid out the choice for Chiquita investors in stark terms – they could either accept the $13 per share rival offer from rival bidders Cutrale-Safra or its own merger proposal with “with an illustrative value in excess of $21 per share in 2016”.
Fyffes’ Brazilian rivals came out swinging yesterday – calling the presentation “nothing more than a desperate attempt by Fyffes to salvage its proposed transaction… which the investment marketplace has valued at a little more than $10.”
The pair went on to state their own “facts”:
- The Cutrale-Safra all-cash proposal represents an attractive premium of almost 30% to Chiquita’s share price before their deal emerged.
- Chiquita/Fyffes faces regulatory uncertainty in Europe
- All the leading proxy advisory firms have recommended their clients vote against the Fyffes merger.
- Fyffes is asking Chiquita shareholders to increase their exposure to European markets – at a time when the Euro has fallen dramatically – and reduce owned production from 37% to 23%, a reversal of Chiquita’s previously-stated strategy.
Crucially though, there is still no sign that Cutrale-Safra are prepared to raise their offer and without a new bid the Fyffes merger still looks favourite when shareholders meet to vote on the deal on 3 October.
The regulatory hurdles mentioned by Cutrale-Safra don’t look insurmountable (although Fyffes-Chiquita felt they needed to offer further concessions to the EU this week) and their concerns about European exposure are mitigated by Chiquita’s existing strength in North America and the dominant position the merged entity would command on both continents.
Any investor unease about the deal has always come down to value – with some murmurings before the emergence of Cutrale-Safra that Fyffes was getting by far the better end of the bargain.
Cutrale-Safra said as much in their response, noting: “It is no wonder that Fyffes is desperate to salvage this transaction, given the transaction provides Fyffes with management control of the proposed combined ChiquitaFyffes, and a 67% premium to Fyffes shareholders.”
The cash value of the Cutrale-Safra might be immediately attractive, but the $10 per share value their statement put on the Fyffes proposal (i.e. its trading price before their own bid) cannot be used as a realistic comparative.
Given the synergies and cost savings generated by the potential merger, analysts have consistently valued the Fyffes deal at around $15-17 per share since the takeover battle began.
Earlier this week David Holohan, an analyst at Merrion Capital, told Bloomberg that Cutrale-Safra would need to bid $16 per share “to match the economics of the merger” , while BB&T Capital Markets’ analysts in the US said that a bid of $15 a share was the minimum required to be seriously considered, and would likely need to reach $16 or $17 per share to succeed.
Earlier this month Fyffes and Chiquita postponed their shareholder votes to approve the deal, granting Chiquita extra time to thrash out the best possible offer with the rival bidders.
So the ball is now firmly in the court of Cutrale-Safra. Unless a surprise new bidder emerges, there looks to only be two possible courses of action – either Cutrale-Safra raise their bid or Chiquita presses on with the Fyffes merger.
Strongly worded press releases win plenty of headlines, but very few M&A battles.
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