Shares of Chiquita Brands International surged on Monday after two Brazilian companies offered to buy the Charlotte, N.C.-based fruit giant and break up a planned merger with an Irish firm.
Sao Paulo, Brazil-based investment firm Safra and Araraquara, Brazil-based juice maker Cutrale are offering to buy Chiquita for $610.5 million in cash, according to a statement issued by the companies.
The bid could upset Chiquita's plans to combine with Dublin-based Fyffes in an all-stock deal by the end of the year, creating the world's largest banana company. Chiquita shares were up more than 31 percent at $13.18 in early afternoon trading.
"Investors are either willing to scrap the Fyffes deal, trading the stock above $13 per share, or are looking for a sweetener from Fyffes," said Kim Noland, director of high yield research at Gimme Credit, an independent research service on corporate bonds.
The two companies would pay $13 in cash per Chiquita share, a premium of 29 percent to Chiquita's closing share price of $10.06 as of Friday. Safra and Cutrale sent the proposal in a letter to Kerrii Anderson, chairwoman of the Chiquita board, and Ed Lonergan, Chiquita's chief executive officer.
"Together, we are confident that this transaction offers compelling and more certain value for Chiquita shareholders as compared with the proposed transaction with Fyffes and significantly enhances Chiquita's business potential," the letter states, requesting a reply by Friday at noon.
The deal could close by year's end, the same time frame as the Fyffes' transaction, the letter said. Chiquita and Fyffes have set Sept. 17 meetings for shareholders of both companies to vote on the $1 billion deal.
The combined ChiquitaFyffes company would be headquartered in Dublin and led by Fyffes CEO David McCann. Most of the company's 320 corporate jobs in Charlotte are expected to remain, executives have said.
Chiquita has been struggling to improve its results. The company earned profits of $18 million in the second quarter, down 42 percent from the same quarter last year.
Chiquita assigned much of the blame to dry weather, which hurt banana production on the company's farms in Panama, Costa Rica, northern Guatemala and Honduras. Chiquita had to buy more bananas than usual on the expensive banana spot market to make up the shortfall.
Lonergan, the Chiquita CEO, said this month that the decision to merge with Fyffes and base the company's headquarters in Dublin wasn't fueled by tax savings, defending the company against a wave of political opposition to so-called "inversions."
One outstanding issue with Chiquita is what Charlotte and Mecklenburg County will do about their share of the $22 million worth of state and local incentives used to lure Chiquita's headquarters away from Cincinnati in 2011. The incentives deal called for Chiquita to keep its headquarters in Charlotte for at least 10 years or repay the incentives.
Lonergan left the door open to repayment in May, saying, "We don't want anything we don't deserve." Spokesman Ed Loyd said this month that Lonergan's words still stand, and the company is continuing to negotiate with government officials about the incentives.
So far, the city and county have paid Chiquita $510,000 each, totaling more than $1 million. They're scheduled to pay the fruit company about $1.5 million more in coming years.
The rest of the incentives money is from the state. More than $16 million, equal to 75 percent of the company's estimated state income tax withholding for the new jobs, will be paid over 11 years. The state also agreed to give Chiquita $2.5 million to match the city and county money.
Chiquita has so far met its hiring targets to receive incentives money.