How Will Chiquita Brands (CQB) Stock React To Two Merger Deals?

NEW YORK (TheStreet) -- Shares of Chiquita Brands International Inc. (CQB) are down -2.98% to $12.71 after juice maker Cutrale and investment firm Safra Group said yesterday they had offered to acquire the company in a $610.5 million cash deal that rivaled an all-stock agreement with Irish tropical fruit company Fyffes  (FYFFF), Reuters reports

Shares of Fyffes closed down 3.50% to $1.38 yesterday.

Cutrale, based in Brazil, and Safra, a global banking and real estate group with strong roots in Brazil, said they were offering $13 per share in cash to Chiquita shareholders, a 29% premium to Chiquita's closing price on Friday.

Both groups said their proposal had been sent to Chiquita's board of directors and urged the company to enter negotiations that will lead to a definitive takeover agreement. They hope to have a response from Chiquita by Friday, Reuters said.

Meanwhile, Chiquita is attempting to close a merger with Fyffes, which the two companies announced in March. The combined market value of Chiquita and Fyffes is currently about $1 billion.  The new firm was expected to be listed in New York but domiciled in Ireland for tax purposes, according to Reuters.

TheStreet Ratings team rates CHIQUITA BRANDS INTL INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHIQUITA BRANDS INTL INC (CQB) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CHIQUITA BRANDS INTL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CHIQUITA BRANDS INTL INC continued to lose money by earning -$0.34 versus -$8.71 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$0.34).
  • CQB, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Food Products industry and the overall market, CHIQUITA BRANDS INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Currently the debt-to-equity ratio of 1.82 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, CQB maintains a poor quick ratio of 0.84, which illustrates the inability to avoid short-term cash problems.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food Products industry. The net income has significantly decreased by 1135.0% when compared to the same quarter one year ago, falling from $2.38 million to -$24.60 million.
  • You can view the full analysis from the report here: CQB Ratings Report

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