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Sumitomo makes an offer for Fyffes but will the deal go ahead this time?

Image: Fyffes: fair use

Shares in Fyffes (LSE: FFY) jumped 45% today after the group announced that it had agreed a €751.4m takeover by Japanese group Sumitomo, which will pay €2.23 (188p) per share in cash, a premium of 49% to the company’s closing price on Thursday.

This isn’t the first time shares in the company have spiked on the prospect of a merger. Fyffes was last involved in a takeover battle back in 2014 when it unsuccessfully attempted to merge with Chiquita Brands International Inc, a US-based bananas producer. At the time this merger was announced, shares in Fyffes jumped around 40%, but the deal fell apart when Chiquita’s board voted against the merger. Chiquita was ultimately acquired by Cutrale-Safra, a joint venture between two Brazilian food companies.

Keeping busy 

Since that deal fell apart, Fyffes has been beefing up its operations acquiring extra capacity for its US melon business in October 2015, along with another banana farm in Costa Rica. In early 2016, Fyffes brought Canadian mushroom grower Highline Produce Ltd for C$145m and soon after the company acquired another Canadian mushroom business All Seasonal Mushrooms Inc.

By chasing these deals, management has made up for the failed Chiquita merger. Shares in the company had hit a high of 110p during 2014 after the merger was announced but had fallen back down to 71p by the end of the year. Before today’s offer became public, the shares had risen to 126p and at the time of writing, they’re trading at 187p, a full 70% above the Chiquita spike high, which is greaat news if you bought some earlier this week.

End of the road

But will they fall back again? Hopefully not. It looks as if this time around it’s the end of the road for Fyffes as an independent company. Sumitomo’s offer has been accepted and the board has recommended the deal to shareholders. 

Commenting on the deal, Fyffes’ chairman David McCann said: “We believe this transaction represents a compelling proposition for our shareholders and crystallises the substantial value created in recent years through the various strategic developments and the strong operating performance of our group.”

Still, before the deal can go ahead its shareholders still have to vote on the offer although the two companies have stated that they’ve already received the irrevocable support of shareholders representing just under 25% of the issued share capital.

It’s easy to see why as the groups look like a good fit. Sumitomo has more than 800 companies in its portfolio and a market capitalisation of about $15bn. The company is already a leading fruit distributor in Asia and is responsible for nearly one-third of all the bananas imported into Japan.

So overall, it looks as if this deal will go ahead and Fyffes’ shareholders are set to receive an impressive payout for their patience over the past few years.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.