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Chiquita (CQB): Revised Inversion Plan With Fyffes Unveiled

chiquitaA plan to complete a corporate tax inversion by Chiquita Brands International (CQB) has been reaffirmed. The corporation announced a better merger deal that will offer shareholder’s a larger percentage of the transaction with Fyffes. If the deal is agreed upon, a planned takeover bid from Brazilian bidders could possibly be blocked.

The initial agreement for Chiquita shareholders was 50.7% of the merged company but under the modified plan, this would increase to 59.6% as confirmed in a joint statement. In comparison, Fyffes shareholders would own about 40.4%.

If for some reason the merger deal falls through, the plan includes an increased breakup fee to Fyffes of 3.5% of the total value of issued share capital. According to the previous agreement, the rate was just 1%.

Fyffes would also earn the right to terminate the transaction if an approval by the shareholders of Chiquita is not finalized on or before October 24, 2014. The recommendation given by the Board of Directors for Chiquita is for company shareholders to vote in favor of the merger. In yesterday’s trading, shares of Chiquita were up more than 2.3% at $14.32.

As stated by Ed Lonergan, CEO for Chiquita, the company is extremely pleased with the added value of the enhanced terms for shareholders and that the transaction with Fyffes is a good strategic partnership.

He adds this new business relationship will bring two complementary companies together with incredible results to include creating a better positioned company that will succeed in a highly competitive market, pushing strong performance, and increasing value for shareholders. Both consumers and customers around the globe will also experience immediate benefit.

Executive chairman of Fyffes, David McCann, said the proposed merger is compelling and strategic, a partnership that would create the number one banana company in the world.

It was after Chiquita postponed its shareholder vote on the transaction last week, which opened financial discussions with Cutrale Group, as well as the Safra Group, located in Brazil and the company that launched an unwanted takeover bid for the mega banana company, that the agreement revision was unveiled.

This past March, Chiquita’s original deal to purchase Fyffes was based solely on stock worth about $500 million but five months later, Cutrale-Safra made a proposal to purchase Chiquita for approximately $625 million, in cash!

In a statement by Cutrale-Safra yesterday, the Brazilian team is still doing a due diligence financial review of Chiquita and as quickly as possible, plans to make a final purchase offer. The team also said the merger values of Chiquita-Fyffes have a combined entity of an estimated $11.82 per share, well under the $13 in cash proposal offered by Curtrale-Safra.

Once the transaction is complete, Chiquita would reincorporate in Ireland, thereby completing the inversion that would ultimately reduce future taxes of the two companies. Recently, there have been numerous inversion deals, which have been criticized by President Obama as being “unpatriotic”. Obama believes these deals have the potential of eroding America’s corporate tax base but also move the tax burden to average taxpayers and smaller businesses.

Last Monday, new rules making inversions more challenging to execute and less profitable were announced by the Department of Treasury. In a statement to The Wall Street Journal, McCann stated that the Chiquita-Fyffes deal was never a transaction driven by tax benefits as some inversion plans are designed to do and that revised terms of the merger had nothing to do with the that announcement.

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