Safra, Cutrale question Chiquita's decision to stick to Fyffes deal

SAO PAULO Wed Aug 27, 2014 3:00pm EDT

SAO PAULO Aug 27 (Reuters) - Juice maker Cutrale and investment firm Safra Group questioned a decision by Chiquita Brands International Inc's board to reject their $611 million takeover bid in favor of a merger with Ireland's Fyffes Plc, saying the move will destroy shareholder value and face unnecessary headwinds.

In a Wednesday statement, Safra and Brazil-based Grupo Cutrale said their takeover proposal is cashcertain, will not have a financing condition and gives shareholders of Chiquita a "compelling premium and a recordhigh multiple."

Both companies lashed out at the board of U.S.-based Chiquita for sticking to an all-stock agreement with Fyffes that was announced in March. In the statement, Safra and Cutrale called Fyffes "an always vulnerable middleman with no material merger or integration experience and a heavy concentration in Europe at precisely the wrong time."

According to both firms, an announcement from Chiquita and Fyffes that they had identified an additional $20 million cost savings from their merger "not only smacks of desperation but, more importantly, we believe underscores the irresponsibility and lack of judgment of the Chiquita board in promoting this transaction."

Efforts to reach Chiquita to comment on the statement were not immediately successful.

The remarks underscore Safra and Cutrale's aim to convince shareholders of Chiquita to mobilize against the Fyffes deal. Cutrale and Safra on Aug. 11 offered $13 per share in cash to Chiquita shareholders, a 29 percent premium to Chiquita's closing price the prior session.

"Unlike the proposed Fyffes combination, the CutraleSafra proposal has no synergy risk, no integration risk and no euro-related risk, the statement said. "If it is risk that shareholders are looking to avoid, we would question the prudence of doing a merger with Fyffes."

Chiquita, whose shares gained 39 percent in the past month, rose 0.3 percent on Wednesday to $14.11 - a sign investors expect Safra and Cutrale to sweeten their offer. In the past year, the stock rose 9.2 percent.

Faced with years of declining orange juice consumption globally, Cutrale is expanding into other regions and products after venturing into grain trading in recent years. The presence of the conglomerate controlled by Brazilian-Lebanese financier Joseph Safra could give Cutrale the financial muscle it needs to outbid Fyffes, a source with knowledge of the deal told Reuters.

The same source said one aspect that could play in Safra and Cutrale's favor is the U.S. government's unease with the so-called tax inversion structure that is at the core of the Chiquita-Fyffes merger - the combined company was expected to be listed in New York but domiciled in Ireland to cut its tax bills. Inversions have drawn heavy criticism from President Barack Obama's administration. (Reporting by Guillermo Parra-Bernal; editing by Andrew Hay)