Safra Group and Cutrale Group filed preliminary proxy fight material with the SEC yesterday after their buyout bid for Chiquita Brands International’s (CQB) was rejected by the banana producer’s management on Thursday.
In a preliminary filling with the SEC, investment company Safra Group and largest orange juice supplier Cutrale Group asked Chiquita shareholders to vote against the company’s planned merger with Fyffes PLC (FYFFF) and to postpone the extraordinary shareholder meeting scheduled for September 17.
North Carolina-based Chiquita considered the all-cash buyout proposal of the two Brazilian groups for $610.5 million as “inadequate” and not in the best interest of shareholders. Its management further highlight to move on with their merger plans with Fyffes for which the company gained shareholder’s approval in March.
Safra and Cutrale said that the rejection of their buyout offer seems unreasonable given that they provide more certain financial gains to the shareholders, whereas the Chiquita-Fyffes merger may be hindered by regulatory concerns regarding tax inversion and anti-trust regulatory issues.
The merged Chiquita-Fyffes entity will become the world’s largest banana supplier and its headquarters will shift to Dublin, Ireland to benefit from lower corporate tax rates. The merger will bring in long-term gains and is more risky, while the deal with Safra and Cutrale will bring in definite cash gains immediately.
The merged company may even face boycott from US consumers due to the shift of its headquarters. This conjecture is based on the recent boycott faced by drug store Walgreen (WAG) after it announced a merger with Alliance Boots and the consequent relocation of its headquarters to Switzerland to avoid taxes.
Since the start of this week when Safra and Cutrale made their offer, Chiquita’s stock price has surged over 30% and closed yesterday at $13.63, 4.8% higher than the Brazilians’ offer price of $13 per share.
The proxy fight will enable Safra and Cutrale to enter into direct negotiations with shareholders. Analysts expect that a buyout proposal of about $15 per share will likely lead to a deal getting inked.
As orange juice consumption declines globally, the acquisition deal, which the two Brazilian groups are pushing to close soon, will allow the world’s largest orange juice supplier to expand its product portfolio and enter into the banana industry. The Cutrale Group is backed by the financially strong Safra Group, which is controlled by the second-richest Brazilian, Joseph Safra. It just seems to be a matter of right price before the Safra-Cutrale Group acquires the banana company.
Chiquita’s stock surged 0.89% yesterday and closed at $13.63.