Chiquita To Merge After Cancelled Inversion With Fyffes
US banana producer and distributor Chiquita has decided to terminate its proposed inversion with its rival Fyffes, in a deal which would have involved moving its tax residence to Ireland, and will instead be acquired.
Chiquita’s decision comes after the announcement of non-legislative measures by the US Treasury Department on September 22 to deter companies from undertaking corporate tax inversions, which are being used by multinationals when merging with an offshore counterpart to move their tax residence abroad and away from the high US corporate tax rate.
While giving no direct indication that the benefits of the merger had been scuppered by the Treasury’s action, Edward Lonergan, President and Chief Executive Officer of Chiquita, confirmed that the company had “determined to terminate the agreement with Fyffes and to engage with Cutrale/Safra regarding its revised offer. … While we are convinced [Fyffes] would have been a strong merger partner, we will now go forward as competitors.”
On October 27, 2014, Chiquita announced a definitive merger agreement with the Cutrale-Safra group, comprising Cutrale, an agribusiness and juice company, and the Safra group, a banking and investment firm, in a deal said to be worth about USD680m.
The merger’s replacement with a takeover for Chiquita follows warnings from the Heritage Foundation, among others, that that anti-inversion measures would, “instead of stemming the tide of inversions, ramp up the outright acquisition of US businesses by foreign ones.”
“If US businesses are frustrated in their efforts to invert and shake free of the onerous US tax code, they could become, most likely willingly, prime takeover targets for large foreign businesses,” it said.
The merger is expected to be concluded by the end of the year or early 2015.
