Brazilian juice maker Cutrale Group and investment firm Safra Group have asked Chiquita Brands International’s investors to vote against the produce giant’s planned merger with Fyffes.
Cutrale and Safra, which have had a takeover offer for Chiquita turned down by the company, filed proxy materials with the US Securities and Exchange Commission on Friday (15 August), in which they provided details on why they believe the Fyffes deal would not benefit shareholders.
The bidders have asked Chiquita shareholders to vote against the company’s proposed transaction with Fyffes and vote in favour of plans to adjourn a special meeting set for 17 September.
In the documents, Cutrale and Safra criticised Chiquita’s plan to merge with Fyffes, labelling it “an inferior transaction”.
They also questioned Chiquita’s past financial performance and its record in integrating other businesses.
Cutrale and Safra said the benefit to Chiquita’s investors was based on the future performance of the combined Chiquita and Fyffes. The suitors pointed to the “integration difficulties” Chiquita had when it acquired the Fresh Express business from Performance Food Group in 2005.
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They also cast doubt on Chiquita’s claim a merger with Fyffes would lead to annual pre-tax synergies of US$40m by the end of 2016.
“Given the difficulty and costs inherent in integrating diverse, global businesses such as Chiquita and Fyffes, there is no assurance that the expected synergies, cost savings and other benefits of the proposed Fyffes combination will be realised fully or at all,” Cutrale and Safra wrote in the proxy document.
Chiquita turned down their US$610.5m takeover bid on Thursday, describing it as “inadequate” and not in the best of interests of Chiquita shareholders”. The company insisted it would push ahead with the merger with Fyffes.
The rejection brought an angry response from Cutrale and Safra, which argued the decision was a sign of Chiquita’s record of “shareholder value destruction”.
In the proxy documents, Cutrale and Safra claimed Chiquita’s own disclosures after announcing the proposed Fyffes deal showed the produce group’s board was putting the business up for sale.
However, they claimed: “It chose a transaction with little to no premium to the Chiquita shareholders. The Cutrale-Safra Proposal is evidence that a premium would have been, and is, available for the Chiquita shareholders had the Chiquita board run a bona fide sale process.
“Cutrale-Safra remains confident that the Cutrale-Safra proposal offers compelling and more certain value for Chiquita shareholders as compared with the proposed Fyffes combination, and we believe it is evident that Chiquita’s shareholders recognise this as well.”
The bidders added: “We believe that the Cutrale-Safra proposal offers holders of Chiquita shares a superior alternative to the value of Chiquita on a standalone basis as well based on past performance. Chiquita’s management articulated a turnaround plan for the company over two years ago, but has struggled to achieve the targeted cost savings or improve profitability to execute the plan. Chiquita has consistently provided overly optimistic guidance that has resulted in its missing Wall Street quarterly consensus earnings estimates in each of the past four quarters.
“While Cutrale-Safra continues to hope that it is possible to reach a negotiated transaction with Chiquita in the near term, Cutrale-Safra is making this proxy solicitation directly to Chiquita shareholders in light of the fact that the special meeting is scheduled for September 17, 2014.”