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Chiquita-Fyffes merger a “dramatic acceleration” for banana value

March 11th, 2014

The CEO of Chiquita Brands International (NYSE: CQB) says it would have taken around 15 years of banana sector income growth to add the same value expected from a merger with Fyffes Plc (ESM: FFY).

Speaking with analysts after an investor presentation, Chiquita CEO Ed Lonergan highlighted the synergies the companies shared, while also having little overlap between brands.

“I think about it this way. We are creating together US$40 million of new value that wouldn’t exist if we were apart, and if you think about the 4% EBIT target we’ve been talking in bananas now for the last 18 months, we’d have to create US$1 billion in new business in order to generate that value,”
said Lonergan, who has been slated as the chairman of the new entity ChiquitaFyffes.

“So we’re talking about delivering this in the first full year of operation after integration, and I think if we were to create US$1 billion of banana business at the growth rate of the category globally, it’s probably 15 years out, so it’s a dramatic acceleration of value creation.

“There’s de minimus overlap of the Fyffes brand and the Chiquita brand in any jurisdiction in the world, and we don’t think there are any issues that we can’t address in the regulatory process.”

The lack of overlap also applies to European ripening facilities, while there is potential to combine strengths across the tropical category.

“If you look at our ripening infrastructure, and this is really a European issue, the overlaps are in fact very few so that actually produces an opportunity for us to move some of our product through each other’s facilities, and I think that can be interesting to look at,” said Fyffes CEO David McCann, who will be CEO of the new entity.

“I suppose we’re a very strong player in the melon business in the U.S., that’s unique to us. We both share modest positions, but important positions in the pineapple business.

“In bananas, the businesses are quite complementary in a way in Europe in that we often play in very different parts of Europe with different customer bases, so I think it’s going to work very well, that we should be able to reach a wider audience with a wider range.”

Lonergan highlighted that both companies ran shipping rotations from the tropics to North America and Europe.

“So we see interesting opportunities to leverage the combined scale of the companies in both of those operations to either reduce the number of vessels overall that we would need or slow steam those vessels and save fuel in the process,” he said.

“We’re very similar in terms of how we think about shipping – we don’t own any vessels between us, we are both committed to substantial containerized shipment business, which provides some very interesting opportunities for us in a combined way.”

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