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Brazil suitors increase bid for Chiquita


Shares of Chiquita Brands International (CQB) surged Thursday after a team of Brazil-based corporate suitors raised their proposed takeover bid for the banana market giant by 50 cents to $14.50.

Chiquita shares closed up just over 8% at $13.76 Thursday.

The nearly 3.6% sweetened offer by the Cutrale Group and Safra Group, the team's second increased bid in just over a week, came on the eve of a Friday meeting where Chiquita shareholders are set to vote on the firm's proposed purchase of Irish rival Fyffes.

The new offer values Chiquita at nearly $680 million based on the number of shares outstanding as of Aug. 4.

Cutrale, an orange juice and global agribusiness company, and Safra, an investment firm, said the increased offer represents a premium of nearly 14% compared with Wednesday's $12.74 closing price of Chiquita shares.

"Chiquita's Board of Directors, in consultation with its financial and legal advisors, will carefully review and consider the revised Cutrale/Safra offer in light of the best interests of the company and its shareholders and consistent with its fiduciary duties," the Charlotte, N.C.-based company said in a statement responding to the new offer.

On Tuesday, Chiquita CEO Edward Lonergan issued a statement in which he reiterated the value of the Fyffes transaction to shareholders and questioned the financial wisdom of supporting the Cutrale-Safra takeover bid.

"Chiquita's Board of Directors is solely focused on maximizing value for all Chiquita shareholders. In contrast, Cutrale/Safra appears only interested in acquiring Chiquita for the lowest possible price without adequately compensating Chiquita shareholders," Lonergan said then.

Chiquita announced its plan to buy Fyffes in March, projecting that the stock-for-stock transaction would create the world's largest banana supplier, a combined company generating an estimated $4.6 billion in annual revenue.

Cutrale-Safra launched their unsolicited takeover effort in August with a $13 a share bid that valued Chiquita at nearly $609.5 million. Chiquita's board rejected that offer and subsequent increased bids the Brazil team submitted prior to Thursday.

The corporate battle over Chiquita's future drew mixed recommendations from influential shareholder organizations and an institutional investor.

Glass Lewis, a proxy advisory firm, Thursday reaffirmed its earlier decision advising Chiquita shareholders to reject the Fyffes transaction and consider other options.

Institutional Shareholder Services said it was reluctant to change its support for the deal in the final days before the shareholder meeting. But ISS acknowledged that the "certainty of value" in the Cutrale-Safra offer in comparison with the longer-term projected value in the Fyffes transaction could make the new offer "more compelling to some shareholders."

Wynnefield Capital, which owns 3.5% of Chiquita, issued a statement that characterized Cutrale-Safra's latest bid as a "significant" increase and reaffirmed its support for the takeover offer.

The Fyffes transaction is structured as a corporate tax inversion — a procedure in which a domestic firm reincorporates in a lower-tax nation overseas in a bid to cut its future U.S. tax bills.

Washington has been split along party lines on corporate inversion. President Obama in July said U.S. firms that pursue the legal transactions were unfairly "gaming the system." Congressional Democrats largely agreed. Republicans, however, argued the issue should be considered as part of a broader revision of the federal tax code, including a reduction on the 35% top tax rate the U.S. imposes on companies total earnings at home and internationally.

The Obama administration on Sept. 22 announced new Department of the Treasury rules aimed at making corporate inversions less profitable and harder to complete. Chiquita, Minnesota-based medical technology giant Medtronic (MDT) and Florida-based Burger King (BKW) nonetheless said they would proceed with proposed tax inversion deals.

However, North Chicago-based biopharmaceutical firm AbbVie (ABBV) and Irish rival Shire (SHPG) on Monday terminated their proposed tie-up, citing the financial impact of the new Treasury rules.