* Combined company will have 14-15 pct market share
* ChiquitaFyffes will have $4.6 bln annual sales
* Deal may raise competition issues
* Fairtrade campaigners worry about further pressure
By Sam Cage
DUBLIN, March 10 U.S. fruit firm Chiquita Brands and Irish rival
Fyffes, Europe's largest distributor, have struck an all-stock deal to create
the world's biggest banana supplier.
With the $526 million tie-up, the new firm will grab some 14 percent of the
global banana market, and considerable negotiating power at a time when
supermarkets are cutting prices for their product owing to an economic downturn.
"Two big fruit companies have felt the downward pressure of the big retail
buyers on their margins and consolidation appears to them to be a strategy for
survival," said Bananalink, a British-based group which works for more
sustainable trade in bananas and pineapples.
The global banana market, worth $7 billion, is currently controlled by four
multinationals, according to the United Nations: Chiquita, Fresh Del
Monte, Hawaii-founded Dole Food Company and Fyffes.
Chiquita and Fyffes sell 180 million boxes of bananas a year between them,
versus 117 million for Del Monte and 110 for Dole. The combined ChiquitaFyffes
will have $4.6 billion in annual revenues and expects to make operational
pre-tax savings of at least $40 million by the end of 2016.
"The first three (companies) on a global scale are not too far away from
each other, whereas Fyffes was a good deal smaller. Now a firm number one has
been created, there will be some impetus for further consolidation in the
sector," said David Holohan, an analyst at Merrion Stockbrokers in Dublin.
The new firm will be listed in New York - though domiciled in Ireland for
tax purposes - and have a market value of $1.1 billion. Chiquita shareholders
will own about 50.7 percent of the combined company and Fyffes shareholders the
remaining 49.3 percent, the companies said.
The deal will be subject to review by competition authorities but, Holohan
added, is unlikely to prompt burdensome regulatory demands because the two
companies operate mainly in separate North American and European markets.
Chiquita Chief Executive Ed Lonergan, who will be chairman of the combined
company, was confident the match of the businesses would persuade regulators to
give it the green light, with most of the savings expected in logistics.
"We looked at it and thought we could create a much stronger competitor,"
Lonergan told Reuters. "The overlap between the businesses is de minimis."
Fyffes shares leaped 44 percent on Monday, bringing the stock, which had
traded at about 10 times earnings prior to the announcement, roughly into line
with its peers
Chiquita shareholders will get one share of the new company for each share
held. Fyffes investors will get 0.1567 of a share in the new group for each
existing share, which values it at a premium of 38 percent over its Friday's
Goldman Sachs and Wells Fargo Securities, LLC acted as financial
advisers for Chiquita and its board and Lazard for Fyffes.
Most bananas are grown for export on large plantations in Latin America and
Africa and are from a single variety. This standardises taste and brings
economies of scale but leaves the bananas vulnerable to diseases which can
require extensive fungicide treatment, a potential hazard to local ecosystems.
Campaigners for sustainable farming expressed concern that the
ChiquitaFyffes tie-up could intensify the economic pressure on small-scale
banana producers, as well as environmental hazards.
"The banana market is dysfunctional and this merger feels like further
proof," said Michael Gidney, chief executive of British charity The Fairtrade
"There's downward pressure that's creating a race for the bottom. The big
producers are under pressure too - the banana business is not working for