Advisory Group, in Switch, Now Favors Chiquita Deal With Fyffes

CHARLOTTE, N.C. (The Charlotte Observer/MCT) -

An influential shareholder-advisory group has changed its recommendation on a proposed merger deal involving Charlotte, N.C.-based Chiquita Brands International, endorsing a revised agreement with Irish fruit company Fyffes.

A second advisory group that lobbied against the deal also said on Monday that it will revisit its original recommendation and release a revised report.

Institutional Shareholder Services last month advised investors to reject the company’s proposal to merger with Dublin-based Fyffes. The advisory group cited the potential for “greater economic value” from an alternative deal, pointing to the “higher cash offer” from two Brazilian companies, orange-juice maker Cutrale and banking conglomerate Safra.

Cutrale-Safra upped its offer to purchase Chiquita to $14 per share, or $658 million, last week, after making a $13-per-share bid in August, five months after the proposed Chiquita and Fyffes merger was announced. A day later, Chiquita’s board rejected the sweetened offer.

In the Fyffes merger, which would create the world’s largest banana company, Chiquita shareholders are set to receive nearly 60 percent of stock in the combined company, ChiquitaFyffes. That’s up from 50 percent in the original agreement after Chiquita board members and Fyffes enhanced the proposed merger to woo shareholders.

Cutrale-Safra has been vocal in its opposition to Chiquita’s possible merger with Fyffes, going as far as accusing board members of deceiving and misleading shareholders about details of the proposed buyout.

The Maryland-based ISS said Monday it now recommends that shareholders approve the Fyffes deal.

After reviewing the value and “relative certainty” of the two competing transactions, ISS said it determined that the offer by Cutrale/Safra would not provide adequate compensation to shareholders to warrant giving up benefits of the renewed Fyffes deal. ISS said the Fyffes proposal would yield more value to shareholders in the long run.

California-based proxy firm Glass Lewis & Co. said it will also release a revised report after Chiquita’s rejection of Cutrale/Safra’s latest offer and a change in its deal terms with Fyffes.

“It doesn’t necessarily mean that we’ll change our recommendation,” said Warren Chen, head of merger and acquisition quantitative research at Glass Lewis. “Updates will include the new deal terms and our views on them.”

Like ISS, Glass Lewis discouraged a merger with Fyffes, saying Chiquita failed to prove that a merger with the Irish company would be superior to a buyout from Cutrale/Safra.

A revised report could be released as early as late Monday or Tuesday, Chen said.

Recommendations from proxy advisers can play a significant role in the outcomes of shareholder votes. Institutional investors seek the recommendations of proxy advisers on a range of issues, from mergers and acquisitions to executive compensation.

ISS-backed shareholder proposals typically garner 15 percent shareholder support, according to ProxyMonitor.org, which keeps a database of shareholder activity for publicly traded Fortune 250 companies.

“We are pleased that ISS recognizes the increased value provided to Chiquita shareholders under our revised transaction with Fyffes,” Chiquita President Edward Lonergan said Monday in a statement.

Chiquita shareholders are set to vote on the Fyffes deal in Charlotte on Friday.

The combined ChiquitaFyffes would be based in Dublin, although company executives have said most of the 320 workers Chiquita employs at its headquarters in Charlotte would stay. The Brazilian companies haven’t disclosed any plans for the Charlotte headquarters.