Chiquita's Fyffes Buy Bears Fruit for Deal Lawyers

UPDATE, 3/11/14, 5:45 p.m. EDT: This article’s sixteenth paragraph has been updated to include the names of Kirkland & Ellis attorneys working on the deal.

U.S. fruit distributor Chiquita Brands International is acquiring Irish rival Fyffes in a $526 million stock-for-stock deal that would create the world’s largest supplier of bananas.

A combination of Charlotte-based Chiquita and Dublin-based Fyffes—both of which have been in existence for more than 125 years—would surpass Dole Food to become the global leader in banana distribution while creating a produce behemoth with a total of $4.6 billion in annual revenues. The companies, which also specialize in such other tropical fruits as pineapples and various melons, expect the deal to result in annual cost savings of at least $40 million by the end of 2016.

The transaction, which was announced Monday, values Fyffes at $1.69 per share—a 38 percent premium over the Irish company’s Friday closing price. Chiquita’s current shareholders would own a 50.7 percent stake in the combined company—to be called ChiquitaFyffes—and Fyffes shareholders would own the balance. Fyffes chairman David McCann is expected to become ChiquitaFyffes’ CEO while Chiquita CEO Edward Lonergan would be the company’s chairman.

The new company will be incorporated in Ireland through a process called corporate inversion that could result in even greater cost savings as the companies take advantage of the Emerald Isle’s lower tax rates. (Chiquita moved its headquarters to Charlotte from Cincinnati three years ago in a move that included at least $22 million in incentives from state and local governments.)

The deal is expected to close before the end of the year, pending the approval of both companies’ shareholders, the High Court of Ireland, and various regulators in the United States and the European Union.

Though the two companies mostly operate in separate markets, the transaction is likely to face a steep path to regulatory approval given that, as The Wall Street Journal notes, more than 80 percent of the global banana market is controlled by four companies: Chiquita, Dole, Fyffes and Fresh Del Monte Produce.

Chiquita said last month that it had lost $31 million in last year’s fourth quarter—compared with the $333 million drop it endured during the same period in 2012—as it continued to deal with lower banana prices in North American markets, the WSJ reported at the time.

Chiquita and its subsidiaries have also come under fire at various points in the past decade for such issues as reports of workers’ rights violations at plantations across Latin America and connections to alleged terrorist organizations. In 2007 the Justice Department hit Chiquita with a $25 million fine after the company admitted paying $1.7 million to a Colombian paramilitary organization, which the U.S. had identified as a terrorist group, in exchange for protection of the company’s operations in the country amid a bloody civil war. (Chiquita has also recently faced lawsuits filed by the families of Colombians killed during the conflict who want the company held liable.)

Both companies have enlisted a host of law firms in both Europe and the U.S. to handle legal aspects of the pending transaction.

Chiquita is relying on Skadden, Arps, Slate, Meagher & Flom, as well as Irish firm McCann FitzGerald and Ohio firm Taft Stettinius & Hollister. Corporate partners David Friedman and Peter Krupp are leading the way for Skadden in New York and Chicago, respectively. Tax partners Nathaniel Carden and David Rievman are also advising, as are finance partner Michael Zeidel, banking partner Lynn McGovern and executive compensation and benefits counsel Timothy Nelson. The Skadden associates working on the deal are Brian Hanigan, Matthew Hofheimer and John Nelson.

Skadden’s previous work for Chiquita includes advising on the company’s $855 million acquisition of packaged salads company Fresh Express in 2005.

Dublin-based corporate partners David Byers and Ben Gaffikin and tax consultant Eleanor MacDonagh, are leading the McCann FitzGerald team advising Chiquita. The Taft Stettinius team includes Cincinnati-based business partners Bridget Hoffman and Tracey Puthoff. James Thompson is Chiquita’s chief legal officer.

Simpson Thacher & Bartlett and Irish firm Arthur Cox are serving as deal counsel for Fyffes on the matter. New York–based M&A partners Mario Ponce and Elizabeth Cooper are leading the Simpson team, which also includes benefits and compensation partner Brian Robbins, capital markets partner Richard Fenyes, tax partner Robert Holo, and benefits and compensation counsel Paul Koppel. The Simpson associates working on the matter are Patricia Adams, Ravi Agarwal, Jennifer Albrecht, Alina Finkelshteyn and Devin Heckman.

Both companies have also brought in separate antitrust counsel to help shepherd the deal through the regulatory process.

Freshfields Bruckhaus Deringer and Kirkland & Ellis are serving as Chiquita’s antitrust counsel on the transaction, with Düsseldorf-based Freshfields partner Martin Klusmann advising the company on EU antitrust matters.