Wynnefield Capital, a long-term holder of Chiquita Brands (NYSE: CQB), owning 1,646,103 shares or 3.5% of the company, today announced that it rejects the Fyffes transaction backed by the Chiquita board as offering inferior value, and that it supports the recently announced $14.00 per share offer made by the Cutrale-Safra Group. “In our analysis, the Cutrale-Safra Group proposal provides clearly superior shareholder value to the Fyffes transaction, and the Chiquita Board’s self-serving behavior threatens significant harm to shareholders, “said Nelson Obus, President of Wynnefield Capital. Wynnefield projects that Chiquita’s shares would fall by $2.00 – $2.50 if the Fyffes transaction were approved. In contrast, Wynnefield’s analysis demonstrates that the all-cash Cutrale-Safra proposal would provide superior value and eliminate the risks associated with a merger. And, as a company analyzed on a cash-flow basis, rather than an Earnings per Share (EPS) basis, Chiquita Brands would be a better company for all stakeholders as a private enterprise. Wynnefield noted that a balanced Discounted Cash Flow Analysis of the Fyffes-Chiquita transaction shows that the all-cash bid made by the Cutrale-Safra Group provides shareholders with greater value. It added that the long-term projections devised by the partisan Fyffes/Chiquita investment bankers are of dubious credibility for several reasons, including:
- Chiquita’s is a commoditized and unpredictable business with operational risks not accounted for in the bankers’ numbers; and
- The bankers’ projection of $60 million in synergies fails to properly account for the fact that the European Union antitrust regulators have already applied restrictions on shipping, resulting in a loss of margin from growers.
Wynnefield cannot speculate as to the reason for the Chiquita Board’s action but notes that the directors essentially guaranteed themselves four seats on a combined Chiquita-Fyffes board (with Mr. Lonergan ascending to Chairman), which would apparently permit the continuance of sizeable board compensation packages.Most appallingly and incredibly, in a desperate effort to perpetuate the Chiquita-Fyffes transaction when faced with a superior Cutrale-Safra proposal and entrench itself with continued board compensation, the Chiquita Board increased the break-up fee from 1% to 3.5% (or from approximately $6.3 million to $21.9 million) as part of the revised Fyffes transaction. Essentially, the Board acted to penalize any shareholder voting against the revised Chiquita-Fyffes proposal – entrenching itself at the expense of the company’s real owners, the shareholders, and limiting potential shareholder upside in a Cutrale-Safra transaction by $0.40 - 0.50 per share. ABOUT WYNNEFIELD CAPITAL, INC. Established in 1992, Wynnefield Capital, Inc. is a value investor specializing in U.S. small cap situations that have company- or industry-specific catalysts.