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.

The Behavior of the Chiquita Brands Board of Directors

Wynnefield believes that the Chiquita Brands Board of Directors failed to carry out its fiduciary duties by agreeing to the inferior Chiquita-Fyffes transaction – a transaction that favors Fyffes shareholders over Chiquita shareholders. This view is shared by the investment markets, which traded down the share price of Chiquita Brands until the initial announcement of the Cutrale-Safra proposal.

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.


Established in 1992, Wynnefield Capital, Inc. is a value investor specializing in U.S. small cap situations that have company- or industry-specific catalysts.

Copyright Business Wire 2010