(Reuters) - Banana producer Chiquita Brands International Inc CQB.N said it would start takeover talks with Brazil’s Grupo Cutrale and Safra Group after its shareholders voted against a proposed merger with Irish rival Fyffes Plc FFY.I.
Chiquita shares rose 2.9 percent to $14.16 in afternoon trading on the New York Stock Exchange on Friday, below the recently sweetened offer of $14.50 from Cutrale-Safra.
Fyffes’ shares fell 5 percent to 94 euro cents in Dublin after the collapse of the deal, which would have created a company domiciled in low-tax Ireland.
“While we are convinced (Fyffes) would have been a strong merger partner, we will now go forward as competitors,” Chiquita Chief Executive Edward Lonergan said in a statement.
The deal is the latest in a series of similar transactions to unravel since Washington began cracking down on so-called “tax inversion” deals last month.
However, BB&T Capital Markets analyst Brett Hundley said the collapse of this deal simply reflected shareholders’ preference for the all-cash Brazilian offer, which values Chiquita at about $682 million. Fyffes had offered only stock.
“Benefits from the tax inversion were going to be very minimal,” Hundley said. “The major loss comes in the form of lost revenue and earnings potential.”
Chiquita would have gained about $5 million in tax benefits through the inversion and $20 million or more in earnings annually if the Fyffes deal had gone through, Hundley said.
Chiquita had said earlier on Friday that it would only enter into discussions with juice maker Cutrale and investment firm Safra if its shareholders rejected a deal with Fyffes.
Cutrale-Safra declined to comment.
“On a standalone basis, Fyffes will be fine. They didn’t need Chiquita to continue being a success,” Goodbody Stockbrokers analyst Patrick Higgins said.
Fyffes and Chiquita said recently that the implied value of their potential deal ranged from $15.46-$20.01 per share.
Fyffes said it was entitled to a termination fee if Chiquita entered into a another deal within nine months.
Chiquita will have to pay Fyffes 3.5 percent of the total closing value of its issued share capital the day before it seals any new agreement, the Dublin-based company said.
Reporting by Sruthi Ramakrishnan in Bangalore and Padraic Halpin in Dublin; Editing by Simon Jennings