Latest in EU Competition Law:

Chiquita–Fyffes deal may be abandoned

Chiquita Brands International, Inc. (Chiquita) announced of its intention to merge with Fyffes Plc (Fyffes) in March 2014. The deal was notified to the European Commission (case M.7220) in August 2014. Recently Cutrale-Safra has made a more attractive offer to Chiquita. It is very likely that Chiquita’s shareholders will vote the merger with Fyffes down.

Background

On 10 March 2014 Chiquita (a leading banana producer) and Fyffes (Irish tropical fruit company) announced about their intention to merge and create the world's largest banana supplier. Following completion of the transaction, current Fyffes shareholders will hold approximately 49.3% and current Chiquita shareholders will hold around 50.7% of the combined entity. The headquarters of the new holding company will be relocated to Ireland.

On 11 August 2014, Brazilian juice maker Cutrale and a banking and real estate conglomerate Safra Group made an offer to Chiquita at 29% higher than the previous day's closing price. The board concluded that the rival bid was inadequate and reaffirmed its intention to merge with Fyffes.

On 15 August 2014, Cutrale-Safra emphasized that its offer is a superior alternative one for Chiquita’s shareholders over the original merger, as among other benefits, shareholders of Chiquita will have a quicker return.

Procedures before the European Commission

SAO PAULO In the meantime, the Chiquita–Fyffes deal was notified to the European Commission in August 2014. It is expected to make its decision by 19 September 2014.

The European Commission has 25 working days (a first-stage review) following the notification of the concentration. This period may be extended to 35 working days in order to consider either a company's proposed remedies or an EU member state's request to handle the review of concentration.

In most cases concentrations are approved by the European Commission. Although occasionally it may open a detailed second stage investigation.

Possible outcome

One of the conditions for Chiquita to close the transaction with Fyffes is shareholders approval by simple majority of 50% at the special shareholders meeting, which will be held on 17 September 2014, just a couple of days before the expected European Commission’s clearance.

If the shareholders decide to vote down the Chiquita-Fyffes deal in favour of Cutrale-Safra, the deal will have to be reassessed and re-notified to the European Commission.

Prior to notifying a new deal, the parties will have to demonstrate to the satisfaction of the European Commission that they have abandoned the concentration. As a general principle, the requirements for the proof of the abandonment must correspond in terms of legal form to the initial act that was considered sufficient to make the concentration notifiable. For instance:

  • In case of a binding agreement, a proof of the legally binding cancellation of the agreement in the form envisaged by the initial agreement (i.e. usually a document signed by all the parties) will be required; Expressions of intention to cancel the agreement or not to implement the notified concentration, as well as unilateral declarations by (one of) the parties will not be considered sufficient;

  • In case of a letter of intent or memorandum of understanding, documents proving that this basis for the good faith intention has been cancelled will be required.

  • In case of a public announcement of a public bid or of the intention to make a public bid, a public announcement terminating the bidding procedure or renouncing to the intention to make a public bid will be required. The format and public reach of this announcement must be comparable to the initial announcement.

State of play and future of Chiquita-Fyffes deal will become clear on 17 September 2014.

#mergersandacquisitions #crossbordertransactions

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