Chiquita Brands International‘s plan to acquire Fyffes of Ireland for $526 million hit a snag last month, when a leading proxy advisory service recommended shareholders vote against the deal.
Now the same group, Institutional Shareholder Services, has changed its tune, voicing its support for a merger of the two big banana producers. On Monday, I.S.S. recommended shareholders support Chiquita’s deal and disregard an all-cash offer from a consortium of Brazilian bidders, the Cutrale Group and the Safra Group.
The unusual reversal comes after Chiquita and Fyffes restructured their deal to make it more attractive for Chiquita shareholders, and after the Brazilian group made its definitive offer of $14 a share last week.
“After reviewing the value and relative certainty of the two competing transactions, as well as the appropriateness of the target board’s response to the unsolicited bid, I.S.S. has concluded that the $14.00 Cutrale/Safra offer, while higher than Chiquita closing prices immediately prior to the Cutrale/Safra’s first bid, does not provide sufficient compensation to Chiquita shareholders to warrant giving up on the potential upside of the revised Fyffes transaction,” the advisory group said in a statement.
If approved, Chiquita’s acquisition of Fyffes would be structured as an inversion, allowing the American company to reincorporate in Ireland and lower its tax bill. And if shareholders approve the deal, they will be walking away from an all cash offer that represents a significant premium to Chiquita’s unaffected share price.
“While the Cutrale/Safra cash bid appears to offer relative certainty of value, it does not appear to offer a sufficient premium to the value of the ChiquitaFyffes combination, as indicated by present value of 2016 Ebitda and free cash flow multiples,” I.S.S. said, referring to earnings before interest, taxes, depreciation and amortization. “As the target board’s response to the unsolicited bid appears to have been appropriate — leading, ultimately, to improvements in both offers prior to the definitive shareholder vote — there does not appear to be any credible evidence the Chiquita board has not been acting in shareholders’ best interest.”
The recommendation from I.S.S. comes just four days before shareholders are set to vote on the deal for Fyffes, at a special meeting scheduled for this Friday.
“We are pleased that I.S.S. recognizes the increased value provided to Chiquita shareholders under our revised transaction with Fyffes, including an improved exchange ratio and increased synergies estimates,” said Edward F. Lonergan, Chiquita’s chief executive. “The Chiquita Board continues to strongly believe in the strategic merits and value provided by the revised ChiquitaFyffes transaction, which it believes will create a combined company that is better positioned to succeed in a highly competitive marketplace, while driving strong performance and value for shareholders.”
The Cutrale Safra group did not immediately reply to requests for comment.
Source: Dealbook