(Recasts to add details on offer, analyst comments, share performance)
By Guillermo Parra-Bernal
SAO PAULO, Oct 17 (Reuters) - Brazilian juice maker Grupo Cutrale and investment firm Safra Group are not considering raising their $14-per-share definitive offer for Chiquita Brands International Inc, a source familiar with the situation told Reuters on Friday.
Cutrale-Safra will walk away from the deal if Chiquita shareholders vote on Oct. 24 for a planned merger with Irish rival Fyffes Plc, said the source, who requested anonymity since the matter is private. Shares of Charlotte, North Carolina based Chiquita deepened losses on the news, shedding as much as 2.4 percent to $13.29.
Earlier in the day, both companies said Chiquita’s board was misleading shareholders about their all-cash bid, while inflating the value of the Fyffes deal by 20 percent. On Thursday, Chiquita’s board said Cutrale-Safra’s offer was “inadequate” and asked shareholders to back the Fyffes tie-up.
Hopes are fizzling that a deal with Cutrale-Safra could boost Chiquita, whose shares have shed two-thirds of their value over the past decade on geopolitical instability, price volatility and uneven global demand for fresh produce. The stock never touched $14 in the wake of the Cutrale-Safra definitive offer, a sign that optimism on the buyout is running low.
Billionaires José Luis Cutrale and Joseph Safra, who teamed up for the Chiquita bid in August, are not keen to raise their bid and instead want shareholders to help them get the job done, BB&T Capital Markets analyst Brett Hundley said. Merrion Capital Group is among investors saying that a Chiquita-Fyffes merger makes more sense than a sale to Cutrale-Safra in current terms.
“Given expected value creation that can likely be realized rather quickly, we continue to view the Chiquita-Fyffes merger as more attractive relative to the Cutrale-Safra bid,” Hundley said.
Fyffes jumped 3.5 percent to 0.988 euros in Dublin - indicating that the Cutrale-Safra offer may not be enough to stop the deal with Chiquita, Merrion Capital analyst David Holohan said.
In August, a banker close to the deal told Reuters that the presence of Joseph Safra, the world’s richest banker with a fortune topping $16 billion, was seen giving Cutrale the “Midas touch” needed to outbid Fyffes with his extensive banking relationships and knowledge of global securities, currency and commodities trading.
Cutrale controls a third of the world’s trade of orange juice concentrate, while Safra Group is a global banking and investment conglomerate controlled by the Lebanese-Brazilian financier and his family.
This week, Cutrale-Safra offered $14 in cash per Chiquita share, valuing the company at $658 million, or 12.4 times annual EBITDA. Cutrale-Safra’s definitive offer represents premiums of about 40 percent to Chiquita’s Aug. 8 closing share price and 19 percent to Chiquita’s price based on revamped terms of the tie-up with Fyffes.
In a statement earlier in the day, Cutrale-Safra said it was submitting a letter to Chiquita’s board confirming its offer will be binding through Oct. 26, two days after Chiquita shareholders will vote on the merger with Fyffes.
The group challenged Chiquita’s estimates for the present value of the future share price range from the Chiquita-Fyffes tie-up saying Chiquita’s board has inflated it “in an egregious act of entrenchment” to between $15.46 and $20.01.
Cutrale-Safra also said the value of shares in ChiquitaFyffes, as the combined firm would be named, is somewhere between $9 and $12, adding that some of the projected sales and earnings for the fourth quarter are “highly questionable.” (Editing by W Simon and David Gregorio)