Chiquita Brands International; market cap (as of 31/10/2014): $676.30mln

On Monday October 27th Chiquita Brands International (CQB.N) finally agreed to be acquired for $682mln by Cutrale Group and Safra Group. Therefore, shareholders will receive $14.50 for each of their shares in cash. The price offered is 44% more than Chiquita’s closing share price on 08th August, the last trading day before the initial proposal. Cutrale and Safra will assume Chiquita’s debt, by extending a buyback of the banana producer’s senior debt due in 2021. Thus, the value of the deal, including the debt, amounts to $1.3 bln that is the biggest acquisition by the Latin America in US for the last 4 years.

The deal comes to fruition after several months of fierce negotiations that almost saw Chiquita merge with rival Irish Fyffes instead. The potential merger would have culminated in the largest seller of bananas globally in terms of sales. Indeed, Chiquita and Fyffes together with Fresh del Monte Produce Inc and Dole Food Co hold nearly $7 bln global banana market.

Chiquita is 114 year old American producer and distributer of bananas and other fresh produce. Currently it holds 40% market share in the United States, and operates in 70 countries. The headquarters is currently situated in Charlotte, North Carolina. According to the accord, Charlotte will become a wholly owned unit of Cutrale-Safra and remain incorporated in New Jersey once the deal is finalized.

However, the company could be better off, by having the access to Cutrale-Safra’s substantial financial expertise and experience in fruit and juice value chain: farming, processing, technology, sourcing, distribution, logistics and marketing.

Chiquita’s share price increased over 40% since the bidders announced their intention of takeover, a huge jump if we consider that in the past decade the shares lost two third of their value because of the geo-political instability of Latin American country, which led to a higher price volatility and an uneven demand for fresh produce.

One of the acquiring companies is Cutrale. Based near Sao Paulo, Cutrale is a large producer of orange juice, apples, lemons, peaches and soybeans. Currently Cutrale produces one third of the world’s orange juice. Meanwhile, the other acquiring company is Safra Group: a network of companies controlled by the billionaire banker Joseph Safra and his family.

The deal would represent for both acquirers a tool to diversify their assets: for the first it is a strategic way to face the declining orange juice consumption globally, by moving the offer in the direction of other fresh produce. Moreover, Chiquita has impressive brand loyalty and recognition, which will provide the company with a strong advantage in an environment characterized by a growing demand for high quality fresh fruits. While for the world’s richest banker it is an investment other than banking, financial and real estate ones.

Cutrale and Safra were advised by Credit Suisse Group AG. Chiquita’s financial advisors were Goldman Sachs Group Inc. and Wells Fargo&Co.

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