LONDON (Alliance News) - Chiquita Brands International Inc and Fyffes PLC Monday said they have reached a deal whereby Chiquita will acquire Fyffes to create the world's largest banana company, but the deal is likely to draw the scrutiny of antitrust regulators.
In a statement, the companies said they have an agreed all-stock deal which will result in Chiquita shareholders owning 50.7% and Fyffes holders owning 49.3% of ChiquitaFyffes, a New York-listed company with annual revenues of about USD4.6 billion.
The deal comes as banana producers continue to struggle, with prices continuing to fall while production costs rise.
Chiquita and Fyffes, which will also have big market share in packaged salads, melons and pineapples, said they expect the deal to result in annual overheads and operational cost synergies of at least USD40 million by the end of 2016. The synergies will mainly come from combining logistics and procurement operations.
Assuming it had already achieved all the anticipated synergies, its combined earnings before interest, tax, depreciation and amortisation in 2013 would have been USD214 million. It would have a net debt to Ebitda ratio of 2.7 times and thinks it will have the opportunity to reduce its leverage in the future.
"ChiquitaFyffes will be able to access worldwide market opportunities and capitalize on both the growing fresh food business and health and wellness trends by more effectively utilizing its geographical footprint and expanded distribution channels," the companies said in a statement.
The combined company will have an operating presence in more than 70 countries across the world and employ about 32,000. It expects to maintain both the Chiquita and Fyffes brands, and will sell more than 160 million boxes of bananas ever year. It will have 24,000 hectares of owned or leased land in Central America.
Under the deal, which values Fyffes at about EUR379 million, the Irish company's shareholders will get 0.1567 ChiquitaFyffes shares for each Fyffes share they hold. Chiquita holders get one share in the new company for one share in the old.
Chiquita Chief Executive Ed Lonergan will become Chairman of the new company while Fyffes Executive Chairman David McCann will become CEO.
Goldman Sachs, Wells Fargo are advising Chiquita, while Fyffes is being advised by Lazard.
Fyffes shares were up 22% at 91.5 pence early Monday, the third-biggest rise on AIM.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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