7th Sep 2006 07:02
Fyffes PLC07 September 2006 Stock Exchange Announcement Fyffes to demerge its General Produce and Distribution business Fyffes is pleased to announce that, subject to shareholder approval and otherconsents, it intends to demerge its General Produce and Distribution businessinto a new, separately quoted company to be owned 100% by Fyffes' shareholders.This new company will be listed on the Irish Stock Exchange's IEX market inDublin. Fyffes' current operations comprise two broadly distinct businesses, itsTropical Produce business and its General Produce business. Overview of General Produce and Distribution business Fyffes' General Produce and Distribution business is one of the leadingoperators within the European fresh produce distribution sector with facilitiesin Ireland, the UK, Sweden, Denmark, Spain, Italy, Holland and the CzechRepublic. It provides a complete basket of fresh produce for its retail andwholesale customers on a year round basis. It is one of the leadingdistributors of Southern Hemisphere fresh produce in Europe, in particular fromSouth Africa and South America. Following recent acquisitions, its annualisedsales will be in the order of €2 billion. Overview of Tropical Produce business Fyffes' Tropical Produce business procures bananas, pineapples and melons fromCentral and Latin America, which it markets in Europe and the US under theFyffes, Turbana and Nolem brands. It is one of the leading distributors ofbananas in Europe. The acquisition in late 2005 of 50% of Turbana also gives ita presence in the US market. From a start-up position four years ago, thedivision is now one of the leading distributors of supersweet pineapplesglobally and, following its recent acquisition of 60% of Nolem in Brazil, it isalso one of the leading suppliers of melons in Europe. In 2006, total sales areexpected to be in the order of €500m. Strategic rationale for the proposed demerger Fyffes' two trading divisions operate within distinct parts of the distributionchain, with different risk profiles and having separate operational managementand facilities. Fyffes believes that the proposed demerger will enable bothbusinesses to separately pursue their respective strategies with greater focusand clarity than currently. The General Produce and Distribution division candeliver stable, appreciable growth each year and, as a stand alone business, itcan attract a higher valuation multiple than the current combined Group becauseit will not be affected by the greater variability in earnings of the TropicalProduce division. Fyffes also believes that its ambitions to continue to pursuefurther industry consolidation in its three key tropical produce categories willbe unaffected by the proposed demerger. Financial rationale for the proposed demerger Following the successful completion earlier in the year of the demerger of theGroup's property business to Blackrock International Land plc, Fyffes hasundertaken a further strategic review of its operations and has concluded thatsignificant incremental shareholder value can be created by the proposeddemerger of the Group's General Produce and Distribution business. This business has delivered a strong and consistent performance over the lastthree financial years, with further growth anticipated in 2006 and 2007. 2005 2004 2003 •'M •'M •'M Revenue (including share of joint ventures) 1,700 1,569 1,383Earnings before minorities, tax and amortisation (EBITA) * 36.3 31.7 22.0 * Adjusted for rent now payable to Blackrock Fyffes' Tropical Produce business delivered an EBITA of €16.9m in the seasonallystronger first half and is targeting an EBITA of €20m for the full year 2006. While the market will ultimately determine the value of the Group, based on therespective earnings of the two businesses, Fyffes believes the potential minimumsum of the parts valuation of the Group is close to €2.00 per share as set outbelow and that this value can best be realised through the proposed demerger. Potential sum of the parts valuation •'M General Produce and Distribution business 330Tropical Produce business 170Cash /sundry assets held for resale 100Current valuation of 40% stake in Blackrock 90Potential sum of the parts valuation 690 Potential value per share 1.97 Proposed management structure of the demerged business Chairman Carl McCannCEO Rory ByrneFinance Director Frank GernonCFO / Company Secretary Frank Davis Further announcements will be made in due course in relation to the appointmentof non-executive directors. Proposed management structure of the continuing business of Fyffes plc Chairman David McCannCEO Jimmy TolanCOO Coen BosFinance Director Tom MurphyCompany Secretary Seamus Keenan Further documentation Detailed documentation relating to the demerger is expected to be posted toshareholders in November 2006 in advance of an Extraordinary General Meeting toseek approval for the proposals (subject to all necessary regulatory and otherapprovals being obtained in the meantime). A further announcement will be madeat that time summarising the main terms of the proposed demerger. Davy will beappointed as nominated advisor and broker to the new company. Commenting on the proposed de-merger, Fyffes Chairman, Carl McCann, said: "Following the successful completion of the demerger of its property businessand reflecting the Board's continuing determination to maximise shareholdervalue, Fyffes intends, subject to shareholder approval, to demerge its GeneralProduce and Distribution business into a new, separately quoted company to be100% owned by Fyffes' shareholders. This proposal has the potential tosignificantly increase the current market value of the existing Group for thebenefit of shareholders." 7 September 2006 For further information, please contact:Brian Bell, Wilson Hartnell PR - Tel: +353-1-669-0030 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
FFY.L