10th Nov 2006 12:40
Fyffes PLC10 November 2006 Stock Exchange Announcement Fyffes issues Circular regarding Proposed Demerger of its General Produce and Distribution Business and Announces Proposed Cancellation of its Listing on the Official Lists and Admission to trading on the IEX and AIM Markets and New company to be called Total Produce plc Further to the announcement of 7 September 2006, Fyffes is posting a circular ("the Circular") today to its shareholders in connection with the proposeddemerger of its General Produce and Distribution Business to a newly formedcompany, Total Produce plc ("Total Produce"). Assuming approval of the proposals at the extraordinary general meeting ("EGM"),all eligible shareholders on the Fyffes share register at 5pm on Friday 29December 2006, will ultimately receive one new share in Total Produce for eachexisting Fyffes share held. In addition, the Board of Fyffes ("the Board") today announces its intention toimplement the "fast track" admission procedures applicable to companies movingfrom the Official List of the Irish Stock Exchange ("ISE") to IEX and from theOfficial List of the United Kingdom Listing Authority ("UKLA") to AIM, and toapply for the cancellation of the Fyffes listing on the Official Lists (togetherthe "Commute"). The Commute is not conditional on the demerger proceeding. TheBoard believes that the Commute is in the best interests of Fyffes and itsshareholders as a whole, whether or not the demerger is approved. The Circular includes notice of an EGM of the company to take place at 10.00amon Tuesday, 5 December 2006 in the Westin Hotel, College Green, Dublin 2. Financial Rationale The Board believes that the current market valuation of Fyffes does notadequately reflect the value of the company's component parts. Consequently, itis the Board's belief that the separation of its two operating divisions willfacilitate the creation of incremental shareholder value through greatertransparency of each division's financial performance. The demerger, togetherwith the Commute, will create two separate listed companies quoted on IEX andAIM allowing shareholders to attribute value more specifically. Strategic Rationale Fyffes' two trading businesses, the Tropical Produce Business and the GeneralProduce and Distribution Business, operate within different segments of thedistribution chain with separate operational management and facilities. The Tropical Produce Business and General Produce and Distribution Business havedifferent risk profiles. The Tropical Produce Business has a higher economicrisk profile as it acts as principal by sourcing most of its produce on anannual fixed price basis, whilst it markets most of its produce on a shorterterm price basis. The General Produce and Distribution Business primarilysources its produce on a daily or weekly basis and therefore is subject to alower market risk. The Board believes that the demerger will enable both businesses to pursueindependent growth strategies with the Tropical Produce Business continuing topursue industry consolidation primarily within the Tropical Produce sector andthe General Produce and Distribution Business primarily continuing to pursueacquisitions within the General Produce and Distribution sector. The Board alsobelieves that the demerger will enhance management focus as the respectiveBoards and management of Fyffes and Total Produce will be fully focused on thesector in which they operate and the Board believes that this will help the twobusinesses to maximise their performance. Information on the General Produce and Distribution Business The General Produce and Distribution Business is one of the leading operatorswithin the European fresh produce distribution sector. It operates a total of66 distribution facilities and 5 ancillary offices throughout Europe withfacilities in Ireland, the United Kingdom, Sweden, Denmark, Spain, Italy,Holland, Belgium, France, the Czech Republic and Slovakia. It is primarilyinvolved in the distribution of a broad range of fresh produce to both retailand wholesale customers under a range of brand names on a year round basis. TheGeneral Produce and Distribution Business is also one of the leadingdistributors of southern hemisphere fresh produce in Europe, in particular freshproduce sourced from South Africa. On completion of the demerger, the GeneralProduce and Distribution Business will seek to achieve further growth bothorganically and by pursuing bolt-on-acquisitions within its sector. Historical Information of the General Produce and Distribution Business The table below summarises the trading results of the General Produce andDistribution Business for the three years ended 31 December 2005. IRISH GAAP IFRS Year ended Year ended Year ended Year ended 31 Dec 2003 31 Dec 2004 31 Dec 2004 31 Dec 2005 •'000 •'000 •'000 •'000 Turnover 1,538,763 1,744,978 1,547,734 1,676,206 Operating profit including share of jointventures and associates 28,650* 31,194* 29,617* 32,349* * after amortisation of intangible assets and joint ventures tax Fyffes adopted IFRS with effect from 1 January 2005. Further financialinformation on the General Produce and Distribution Business is set out inCircular. Financial effects of the Demerger If the demerger had taken place on 31 December 2005, Fyffes' turnover would havebeen reduced by approximately €1,676 million, and its operating profit wouldhave been lower by approximately €32 million. If the demerger had taken place on30 June 2006, Fyffes' total net assets at that date would have been reduced by€164 million to €262 million. It is intended that Total Produce will commence operations on 31 December 2006with €10 million net debt. Furthermore, in consideration of Fyffes agreeing totransfer its entire interest in the Everfresh Group to Total Produce, thebusiness transfer agreement requires Total Produce to assume the obligation topay the final consideration to purchase the remaining 40% of the Everfresh Groupin May 2007, subject to a maximum payment of €49.6 million. As at 30 June 2006,Fyffes had accrued €35 million in this regard. Bank Facilities In connection with the proposed demerger, new credit facilities have beennegotiated with a number of banks for Total Produce and Fyffes. In addition toexisting debt in certain non wholly owned subsidiaries and joint ventures, TotalProduce will have gross facilities amounting to €200 million. No new equitycapital is being raised by Total Produce in relation to the demerger. Fyffeswill have gross facilities amounting to €100 million and substantial liquidresources. Ongoing Relationships between Fyffes and Total Produce On completion of the demerger, Fyffes and Total Produce will operate asseparately quoted companies. Fyffes and Total Produce will continue to havetrading relationships which will be conducted on an arm's length commercialbasis. In this regard, both companies have entered into a number of agreementscovering arrangements in relation to supply of tropical produce, trademark usageand transitional services which will become effective upon completion of thedemerger. Pension The demerger will result in some active members of three of the Group's definedbenefit schemes, in Ireland, Holland and the UK, transferring to new definedbenefit pension schemes, in their jurisdictions. If implemented, the demergerwill also crystallise additional liabilities of STG£7.8 million (approximately€12 million) in respect of a number of subsidiaries which will no longer beadhered to the UK scheme. Fyffes intends to make an additional once-offcontribution to the UK scheme to settle this liability on completion of thedemerger. Board Members of Total Produce following the Demerger It is expected that the board of directors of Total Produce will, with effectfrom the completion of demerger, comprise the following members: C P McCann Executive ChairmanR P Byrne Chief ExecutiveJ F Gernon Finance DirectorR B Hynes Non-Executive DirectorJ J Kennedy Non-Executive Director Frank Davis will be appointed as Company Secretary. No further changes areanticipated in relation to the operating management structure as a consequenceof the proposed demerger. Jerome Kennedy has indicated his intention to resignas a non executive director of Blackrock International Land plc with effect from31 December 2006. Admission of Total Produce Shares to IEX and AIM It is intended that Total Produce shares will be admitted to trading on the IEXmarket of the Irish Stock Exchange and the AIM market of the London StockExchange. It is expected that Total Produce shares will commence trading onTuesday, 2 January 2007 and that share certificates will be posted to certifiedholders by Friday, 5 January 2007. Information on the Continuing Group Fyffes will retain the Tropical Produce Business which is primarily involved inthe production, procurement, shipping, ripening, distribution and marketing ofbananas, pineapples and melons. This fruit is generally procured and shippedfrom Central and Latin America and is sourced under long term supply contractswith purchase prices agreed annually. The Tropical Produce Business currentlymarkets fruit in Europe and the United States primarily under the Fyffes,Turbana and Nolem brands and is one of the leading importers of bananas into theEU. The acquisition in late 2005 of a 50% shareholding in Turbana Inc alsogives the Tropical Produce Business a presence in the United States bananamarket. From a start-up position four years ago, this Business is one of theleading marketers of supersweet pineapples globally and, following its recentacquisition of 60% of Nolem in Brazil, it is also now one of the leadingsuppliers of melons in Europe. On completion of the demerger, Fyffes willcontinue to pursue further industry consolidation in its three key TropicalProduce categories - namely bananas, pineapples and melons. Fyffes will continue to own 40% of Blackrock International Land plc, the quotedproperty company which was formed and listed on IEX and AIM following thedemerger of Fyffes' property undertaking in May of this year. Board Members of Fyffes following completion of the Demerger Following completion of the demerger, it is expected that the Board willcomprise the following members: D V McCann Executive ChairmanJ P Tolan Chief ExecutiveC Bos Chief Operating OfficerT G Murphy Finance DirectorJ D McCourt Non-Executive DirectorW M Walsh Non-Executive DirectorG B Scanlan Non-Executive DirectorDr P F deV Cluver Non-Executive DirectorR B Hynes Non-Executive Director Rose Hynes will remain on the Board until 30 April 2007. Seamus Keenan willremain Company Secretary. Background to and reasons for the Commute After careful consideration, the Board has concluded that IEX and AIM are themost appropriate markets for the Fyffes shares. It is the Board's view that theregulatory regime attaching to IEX and AIM companies is better matched to thecircumstances of Fyffes, whether or not the demerger is approved, than theregime attaching to larger companies on the Official Lists. Implementation of the Commute The listings of Fyffes shares on the Official Lists are, subject to shareholderapproval, expected to be cancelled at 8.00am on Wednesday, 10 January 2007, andit is expected that the admission of Fyffes Shares to IEX and to AIM will becomeeffective at the start of trading in each market on Wednesday, 10 January 2007,immediately following cancellation of the Listing. Following its admission to IEX and AIM, Fyffes will be subject to the regulatoryand disciplinary controls of IEX and of AIM as constituent markets of the IrishStock Exchange and the London Stock Exchange respectively. Fyffes shares willcontinue to be eligible for inclusion on the ISEQ Index and be traded on theXETRA platform in Ireland. In the UK, Fyffes shares will continue to be tradedon SEAQ and will also be eligible for inclusion in the FTSE AIM Index. Tradingin Fyffes shares following the transfer to IEX and AIM may be conducted in thesame way as prior to the Commute. Extraordinary General Meeting Because of the scale of these proposals, the approval of Fyffes' shareholders isrequired. Accordingly, an EGM has been scheduled to take place at 10.00am onTuesday, 5 December 2006 in the Westin Hotel, College Green, Dublin 2. The Board, which has been so advised by Davy in its capacity as financialadvisor to Fyffes, considers the proposed bonus issue, demerger and Commute tobe in the best interests of Fyffes and its shareholders as a whole and isrecommending that shareholders vote in favour of the resolutions as set out inthe Notice of EGM in the Circular. In providing advice to the Board, Davy hasrelied upon the Board's commercial assessments of the proposed bonus issue anddemerger of Fyffes General Produce and Distribution Business. Document availability Copies of the Circular have been submitted to the Irish Stock Exchange and theUK Listing Authority and are available for inspection at: Company Announcements Office Document Viewing Facility of theIrish Stock Exchange UK Listing Authority28 Anglesea Street Financial Services AuthorityDublin 2 25 The North ColonnadeIreland Canary Wharf London E14 5HS United Kingdom The Circular is also available on the Fyffes website, www.fyffes.com.Shareholders are recommended to read the whole of the Circular and not relysolely on the summarised information contained in this announcement. Commenting on the proposed demerger, Fyffes Chairman, Carl McCann, said: "The Board believes that the proposed demerger of Fyffes' General Produce andDistribution Business to Total Produce plc has the potential to significantlyincrease shareholder value. The experienced management teams in Fyffes andTotal Produce remain ambitious to grow their businesses further, bothorganically and through acquisitions and alliances." Fyffes plc10 November 2006 For further information, please contact: Ivan Murphy or Fergal Meegan, Davy Corporate FinanceTel: +353 -1-679 6363 Brian Bell or Andrew McLindon, Wilson Hartnell PRTel: +353-1-669 0030 Davy is acting exclusively for the company and no one else in connection withthe proposed bonus issue, demerger and Commute (the "Proposals") and will not beresponsible to anyone other than the Company for providing the protectionsafforded to its clients or for providing advice in relation to the Proposals. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
FFY.L