U.S. Markets close in 5 hrs 4 mins

Chiquita banana bidding war is possible

Hot Stock Minute

A couple of Brazilian suitors are now courting Chiquita Brands (CQB). The Cutrale Group, an orange juice supplier, and the Safra Group, a private bank, made an unsolicited joint offer of $611 million or $13 a share for Chiquita on Monday. The banana company is already in the middle of a merger with Irish fruit company Fyffes. That deal, announced in March, would be an inversion where the new company would domicile itself in Ireland for tax purposes.

The Obama administration is now looking to take steps to ward off the wave of tax inversion deals we have seen this year. Yahoo Finance Senior Columnist Michael Santoli said the Brazilians are obviously taking advantage of the circumstances because there are a lot of questions about whether Washington might try to at least weaken the attractiveness of these inversion deals.

Santoli is not surprised that another bidder emerged for Chiquita. “It is without a doubt a very good global brand, and key strategic resource, in a way, in the food market,” Santoli said. Chiquita accounts for about 22% of global banana exports by volume, according to Banana Link, a nonprofit trade organization based in the U.K. 

It is also not the first time a bidding war broke out for a food company. Santoli said the unexpected offer for Chiquita reminds him of when JBS, Brazil’s biggest meat producer, offered to buy Hillshire Brands (HSH) in May. JBS did not win the fight for Hillshire Brands, but they did bid up the price that Tyson Foods (TSN)  paid for the American food company.

Chiquita said it would consider the offer from Cutrale and Sufra, which is a 29% premium over Chiquita's closing share price Friday. “Tax inversion in itself is not necessarily worth more than a higher acquisition price today, especially if the inversion benefits are not going to be lasting," Santoli said.