Pick of the bunch
Behind the sale of Fyffes for €751m
FYFFES is usually referred to as a fruit company, but arguably its key skills are that of a logistics company. It is one of very few companies which imports bananas, a staple of the Western European diet, from the plantations of Central and South America, to these shores. Given this key part of the business, it is perhaps of little surprise that Coen Bos, the chief operating officer of Fyffes was a merchant navy ship’s master and active at sea until 1983.
This valued ability in logistics is one of the main reasons Japanese firm Sumitomo Corporation — which describes itself as a diversified trading company — has entered into a generous takeover deal worth €751m.
The percentage of irrevocable undertakings secured to date is lower than average, at just over 27pc. Companies often prefer to have closer to 40pc of the shareholders on board to reduce the risk of a counter offer. Several other large shareholders, including FMR with 9.6pc, Invesco with 4.7pc, BlackRock with 4.5pc, BNP Paribas with 3.6pc and Investors Group with 3.4pc have yet to signal their acceptance.
However, market sources say that in this case, the lower number reflects the short time-frame in which the acquisition was agreed, as well as the buyer’s desire for discretion.
The McCann family’s endorsement of the plan and the price achieved, at a 49pc premium to Fyffes’ closing share price of €1.50 on Thursday evening, no doubt gave all involved considerable comfort.
“We’re very pleased that our two largest shareholders with a combined 25pc have given irrevocable undertakings in support of the deal,” said a spokeswoman for the company.
Sumitomo’s business consists of 800 companies and has been involved in the banana industry since the 1960s, with a market-leading position in Asia. The group represents around 30pc of the bananas imported into the Japanese market, so Fyffes is a good fit.
Market sources doubt that a counter bid will emerge and shareholders seem happy with the offer.
Goodbody analyst Patrick Higgins said: “The offer from Sumitomo represents a compelling premium which realises a lot of its future potential.
“Fyffes will benefit from the greater scale, reach and resources of a much larger group. The two groups also have highly complementary business as the largest banana distributors in Europe (Fyffes) and Asia (Sumitomo),” he added,
“Overall, the offer looks attractive for Fyffes shareholders. With almost 30pc support from existing shareholders, we expect the deal to complete smoothly.”
The agreed takeover of Fyffes brings to an end one of the most extraordinary sagas in Irish business history.
The company that became Fyffes was founded in 1902 by Charles McCann in Dundalk. However, it was under the leadership of his son Neil that the company grew from a provincial fruit and vegetable merchant into a major player in the global banana trade.
Neil (or “Neily” as he was known to friend and foe alike) possessed that buccaneering instinct often associated with entrepreneurs.
He took over the family business following the death of his father in 1954 and over the following three decades gradually acquired most of his competitors to become the largest fresh produce distributor in Ireland.
In 1981 the company, by then renamed FII, was floated on the Irish Stock Exchange with the support of Jim Flavin’s DCC, which became a shareholder in FII.
However, the deal which transformed the company came five years later when it acquired Fyffes, a sleepy British banana distributor, from the US banana giant Chiquita.
FII was renamed Fyffes after the acquisition. After labouring in the backwoods for a third of a century, the Irish company was now up there with the big boys.
Chiquita retained a minority stake in Fyffes after the FII deal. However, any hopes it may have nurtured of dominating the enlarged company were quickly dashed. Chiquita sold up within two years, setting up a corporate grudge match between the two companies that was to last for quarter of a century.
Two years after the Fyffes takeover Neily pulled off his most audacious deal, swooping to acquire a 20pc stake in Irish whiskey producer Irish Distillers Group.
This set up a battle royal for control of IDG between GrandMet and Pernod Ricard with Fyffes receiving a €32m profit.
In 2000, DCC sold its 9pc shareholding in Fyffes. It took advantage of the dotcom mania surrounding Fyffes’ worldoffruit.com online fruit trading site, which briefly pushed up the Fyffes share price to almost €4, to sell out at an €85m profit. Then a few weeks later Fyffes issued a profit warning and the share price halved. This resulted in a bitter falling out between Fyffes and its former shareholder with Fyffes alleging that Flavin, who had been a director of Fyffes until the share sale, had acted on inside information when selling the DCC stake in the company.
This triggered an epic legal battle with the High Court first ruling in DCC’s favour before the Supreme Court reversed the ruling in 2007.
Neily stepped down as DCC chairman in 2003. In 2006 his two sons, David and Carl, split the group with its fresh produce operations being hived off into a new company, Total Produce, chaired by Carl with David chairing the remaining Fyffes, which retained the global banana business.
In 2014 Fyffes and Chiquita buried the hatchet and agreed to a merger. This was scuppered when Fyffes was outbid by a Brazilian consortium. By agreeing to the deal with Chiquita, Fyffes had advertised its vulnerability. To many, it was only a matter of time before a buyer would come along, although the market had no inkling that a deal was in the offing. With the McCann shareholding in Fyffes down to less than 12pc, the family were never likely to resist the Sumitomo bid which values the company at a chunky 17 times operating profits.