Fyffes has announced it plans to de-merge its general produce and distribution business into a new business separate from its banana, pineapple and melon operation and wholly owned by Fyffes shareholders and listed on the Irish IEX market in Dublin. The change is subject to shareholder approval and other consents.
Fyffes’ general produce and distribution business is one of the leading operators within the European fresh produce distribution sector with facilities in the UK, Ireland, Sweden, Denmark, Spain, Italy, Holland and the Czech Republic. It is this division that supplies a broad range of fresh produce to supermarket and wholesale customers year round. It is also one of the leading distributors of southern hemisphere fresh produce in Europe, in particular from South Africa and South America. Following recent acquisitions, its annualised sales will be in the order of €2 billion.
Fyffes’ tropical produce business procures bananas, pineapples and melons from Central and Latin America, which it markets in Europe and the US under the Fyffes, Turbana and Nolem brands. It is one of the leading distributors of bananas in Europe. The acquisition in late 2005 of 50 per cent of Turbana also gives it a presence in the US market. From a start-up position four years ago, the division is now one of the leading distributors of supersweet pineapples globally and, following its recent acquisition of 60 per cent of Nolem in Brazil, it is also one of the leading suppliers of melons in Europe. In 2006, total sales are expected to be in the order of €500m.
In a statement Fyffes’said the two trading divisions operate within distinct parts of the distribution chain, with different risk profiles and having separate operational management and facilities. “Fyffes believes that the proposed demerger will enable both businesses to pursue separately their respective strategies with greater focus and clarity than currently,” read the statement. “The general produce and distribution division can deliver stable, appreciable growth each year and, as a stand alone business, it can attract a higher valuation multiple than the current combined group because it will not be affected by the greater variability in earnings of the tropical produce division.”
Fyffes also believes that its ambitions to continue to pursue further industry consolidation in its three key tropical produce categories will be unaffected by the proposed demerger.
The Fyffes statement also said that following the successful completion earlier in the year of the de-merger of the Group’s property business to Blackrock International Land plc, Fyffes has undertaken a further strategic review of its operations and has concluded that significant incremental shareholder value can be created by this latest proposed de-merger.
“While the market will ultimately determine the value of the group, based on the respective earnings of the two businesses, Fyffes believes the potential minimum sum of the parts valuation of the group is close to €2.00 per share and that this value can best be realised through the proposed demerger,” the statement said.
The proposal would see Carl McCann as chairman, Rory Byrne as ceo, Frank Gernon as finance director, and Frank Davis as cfo and company secretary.
Meanwhile, the proposed management structure of the continuing business of Fyffes plc would see David McCann as chairman, Jimmy Tolan as ceo, Coen Bos as coo, Tom Murphy as finance director and Seamus Keenan as company secretary.
Detailed documentation relating to the de-merger is expected to be posted to shareholders in November 2006 in advance of an Extraordinary General Meeting to seek approval for the proposals (subject to all necessary regulatory and other approvals being obtained in the meantime). A further announcement will be made at that time summarising the main terms of the proposed de-merger.
Commenting on the proposed de-merger, Fyffes Chairman, Carl McCann, said: “Following the successful completion of the de-merger of its property business and reflecting the board’s continuing determination to maximise shareholder value, Fyffes intends, subject to shareholder approval, to de-merge its general produce and distribution business into a new, separately quoted company to be 100 per cent owned by Fyffes’ shareholders. This proposal has the potential to increase significantly the current market value of the existing group for the benefit of shareholders.”
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