Bottom Line: A fruitful combination that could slip up
IN POPULAR word game Bananagrams, players compete against their opponents to create a grid of connected words – like a crossword – in the shortest possible time. It’s a race to use up all the tiles on the table, and a breeding ground for familial disputes as speedy players let phoney spellings slip (unintentionally or otherwise) through the cracks.
Executives at Fyffes and Chiquita will be hoping their more measured approach to mixing a banana smoothie won’t lead to arguments – particularly with the antitrust-authorities-on-high in both New York and the EU.
Between them, the Irish-American duo will control about 14 per cent of the global banana market, but are more likely to get scrutiny from the competition chiefs for their wider business, with regulators also looking at which major buyers the pair have contracts with and where their produce is stored and ripened. If watchdogs are comfortable with the terms, then investors in Fyffes should be in for a treat. The deal values the Dublin-based firm at a 38 per cent premium to Friday’s close, and would create a banana giant with combined revenues of $4.6bn and earnings before interest, tax, depreciation and amortisation of $174m, with an additional $40m of synergies in the pipeline.
A company of that size has a better chance of negotiating with major buyers like supermarkets, where competitive pricing has squeezed the industry in recent years.
Games of Bananagrams have been known to end in tears. Investors must keep their fingers crossed that this tie-up doesn’t go the same way.