Shares in Fyffes have closed over 46% higher in Dublin after the company announced that it will merge with Chiquita to create the world's largest banana supplier.

The company will be called ChiquitaFyffes plc and will be listed on the New York Stock Exchange and domiciled in Ireland.

Both the Chiquita and Fyffes brands will continue. As a result of the deal Chiquita shareholders will own about 50.7% of ChiquitaFyffes, and Fyffes shareholders will own approximately 49.3% of ChiquitaFyffes.

Ed Lonergan will serve as chairman of the new group and David McCann will become CEO of the combined company.

The company said the deal will create a global banana and other fresh produce company with approximately $4.6 billion in annual revenues.

The merger is expected to be completed before the end of 2014.

The company's shares soared in Dublin trade after the deal was announced. Chiquita shares were also higher on Wall Street today, rising by as much as 12% in early trade.

"This deal will be transformative and offer exciting opportunities for the new business. We are looking forward to working with the Chiquita team to build a combined company which is well positioned to succeed in our highly competitive marketplace and which will create significant value for our shareholders," said David McCann, Fyffes' executive chairman.

Describing the deal as a milestone for the two companies, Chiquita's CEO Ed Lonergan said it brings together the best of both companies, which will create significant shareholder value for its shareholders and offer immediate benefits for customers and consumers worldwide.

"The combined company will also be able to provide customers with a more diverse product mix and choice. We know Fyffes well and our shared heritage will help to ensure a smooth integration as we work to bring best practices across geographies and business units to achieve substantial operating efficiencies," he added.

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% over its Friday's closing price.

Chiquita describes itself as an international marketer and distributor of bananas, salads, other fruits and healthy snacks. It is headquartered in North Carolina in the US and has annual revenues of over $3 billion. It employs about 20,000 people worldwide and has operations in almost 70 countries.

Fyffes is an international importer and distributor of tropical produce. It has annual revenues of $1.5 billion and has operations in Europe, the US, Central and South America, while it also recently begun operations in Asia. It has a global workforce of over 12,000. 

The global banana market is controlled by four multinationals, according to the United Nations - Chiquita, Fresh Del Monte, Hawaii-founded Dole Food Company and Fyffes.

With this $526m deal, ChiquitaFyffes will grab about 14% market share.

Chiquita and Fyffes sell 180 million boxes of bananas a year between them, compared to 117 million for Del Monte and 110 for Dole. Their merger is expected to generate operational pre-tax savings of at least $40m 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.
The deal will be subject to review by competition authorities but, Holahan added, is unlikely to prompt burdensome regulatory demands because the two companies operate mainly in separate North American and European markets.

Fyffes results

Fyffes also said today that its total revenue of the year to the end of December rose by €64m or 6.3% to €1.1 billion.  

Its pre-tax profits rose to 28.7m form 26.m the previous year, while adjusted profit before tax for 2013 amounted to €31.1m, 6.3% up the previous year.

The company said that overall trading conditions have been satisfactory in the year to date in 2014. Its board is proposing to pay a final dividend for 2013 of €1.49 cent per share, up 4.9% on the previous year.  

Total dividends for the full year will amount to €2.17 cent, 4.8% up on the previous year.

Fyffes said it saw "a broadly satisfactory performance in the banana category in 2013", with profits slightly down on the very strong result in the previous year. It said the industry experienced further significant inflation in the cost of fruit during 2013, continuing a pattern seen over the last few years.  

The company reported an improved result in the pineapple category in 2013.  Despite higher production costs, market conditions were generally more positive throughout the year due to improved stability in supply volumes.  

Its US melon business saw a "satisfactory" result in 2013. Fyffes said that favourable weather in the production regions during the key import season, in the first half of the year, resulted in improved yields and lower production costs. 

"Building on its very strong performance in the previous year, Fyffes is pleased to report a further increase in revenue and earnings in 2013, driven mainly by continued organic growth, with EBITA towards the upper end of the target range for the year," commented the company's chairman David McCann.

"Overall trading conditions have been satisfactory in the year to date in 2014. Fyffes’ target adjusted EBITA for 2014 is in the range €30m-€35m," he added.