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Chiquita and Fyffes identify additional USD20m post-merger savings

Chiquita Brands International and Fyffes have updated the anticipated annualised pre-tax cost synergies for the proposed combination of the two businesses.

Chiquita and Fyffes have identified an additional USD20 million of synergies for a total of at least USD60 million in annualised pre-tax cost synergies by the end of 2016, reflecting additional information which has become available regarding optimisation of sourcing and shipping logistics, as well as the output of the information technology integration planning work stream that was established after the proposed combination was first announced.
The USD20 million of additional recurring annual synergies is anticipated to come from European and Mediterranean shipping benefits enabled by the broad geographic sourcing diversity of the combined company, as well as information technology efficiencies due to the implementation of cloud computing.
"As a result of our diligent and thorough integration planning efforts, Chiquita and Fyffes have identified an additional USD20 million of synergies that will allow ChiquitaFyffes to deliver even more value for our shareholders and result in a combined company with stronger earnings power. Chiquita and Fyffes remain committed to the transaction and are continuing to work together to complete the Combination as expeditiously as possible," say Ed Lonergan, Chiquita's chief executive officer, and David McCann, Fyffes executive chairman.
Chiquita and Fyffes believe approximately 50 per cent of the USD60million of synergies are achievable in the first year following the close of the merger, with the remaining synergies achieved by the end of the second year. These synergies will positively impact ChiquitaFyffes financial profile as the combined company is expected to generate significant and increased free cash flow.
Fyffes says it has delivered a strong result in the first half of 2014 with adjusted EPS 39.2 per cent higher. Based on its first half performance and continued positive trading conditions early in the second half, Fyffes is increasing its target adjusted EBITA for the full year 2014 to the range EUR38 million to EUR42 million, from EUR30 million to EUR35 million previously, and compared to EUR32.7 million for the full year in 2013.
Separately, Chiquita has announced a range of efficiency initiatives anticipated to reduce its costs by approximately USD14 million to USD16 million. In order to achieve these savings, Chiquita's current US-Gulf shipping rotation will be replaced with larger, more efficient vessels allowing for some costs and stowage capacity to be shared with a third-party shipping partner, resulting in lower per unit shipping costs for both. Chiquita anticipates that these savings will begin impacting Chiquita's results late in the fourth quarter of 2014 and will be fully implemented in 2015.
On 10 March, Chiquita and Fyffes entered into a definitive agreement under which Chiquita will combine with Fyffes, in a stock-for-stock transaction that is expected to result in Chiquita shareholders owning approximately 50.7 per cent of ChiquitaFyffes, and Fyffes shareholders owning approximately 49.3 per cent of ChiquitaFyffes, on a fully diluted basis.

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