Chiquita Brands International to Acquire Fresh Express
Transformational Combination of Market Leaders Will Create a Consumer-centric
Company Focused on Healthy, Fresh and Convenient Produce
CINCINNATI, Feb. 23 /PRNewswire-FirstCall/ -- Chiquita Brands International,
Inc. (NYSE:CQB) today announced it has entered into a definitive agreement to
acquire the Fresh Express unit of Performance Food Group (NASDAQ:PFGC), for
$855 million in cash. Fresh Express is the No. 1 seller of packaged salads in
the United States, with 40 percent retail market share and approximately $1
billion in revenues. With this acquisition, Chiquita will immediately become
the leader in the fast-growing value-added salads category. In addition to its
wide variety of salad products, Fresh Express is a leading supplier of
fresh-cut fruit. The transaction is expected to close in the second quarter
2005, subject to satisfaction of customary closing conditions, including
completion of the Fresh Express 2004 annual audit.
"I believe this is the most important strategic and transformational move the
company has made in decades," said Fernando Aguirre, chairman and chief
executive officer of Chiquita Brands International. "Fresh Express fits
seamlessly into our sustainable growth strategy to become a world-class,
consumer-driven leader of branded produce by building a high-performance
organization, strengthening our core business and, most importantly, pursuing
profitable growth.
"We continue to focus on satisfying the primary consumer needs of health,
taste, freshness and convenience, and Fresh Express' products are a perfect
fit," Aguirre said. "The acquisition announced today will combine two great
companies and allow us to leverage our complementary strengths and experience
in selling value-added fresh produce.
"The Fresh Express acquisition, which we expect to be accretive to earnings in
2006, will help us diversify and improve the quality of our earnings," said
Aguirre. On a pro forma basis, the combined company will become much more
balanced, as Europe and North America will generate 55 percent and 44 percent
of total revenues, respectively. Today, 72 percent of Chiquita's revenues come
from Europe.
"With a more balanced mix of earnings between Europe and North America and less
dependence on bananas, we will be less susceptible to the risks inherent in our
European business, such as pending changes to the E.U. banana import regime and
foreign exchange," he said.
Aguirre continued, "In addition to diversifying earnings, this transaction
should accelerate our path to profitable growth, creating a unique opportunity
to cross-sell our existing products, leveraging the excellent retail customer
relationships of both companies and the foodservice expertise of Fresh Express. By acquiring an established national infrastructure and state-of- the-art
technology, we gain immediate scale and an effective platform to launch new
products throughout North America, including the ability to accelerate national
distribution of fresh-cut fruit." The company expects to promptly convert all
fruit-based products to the Chiquita brand and retain the Fresh Express brand
for value-added salads.
Experienced, Deep Management Team "I've been extremely impressed with the experience and depth of the Fresh
Express management team, including many who helped invent the value-added salad
category," said Aguirre. Chiquita expects the Fresh Express business to
continue to be based in Salinas, Calif.
"I'm excited about the opportunity we have to learn from one another and build
on each company's strengths to deliver innovative, value-added products," said
Aguirre. "Successful acquisitions often hinge on complementary corporate
cultures, and so I'm thrilled that we share the same values and the same
commitment to quality and to meeting consumer needs. I'm confident that Fresh
Express and Chiquita are a perfect fit and look forward to our combined company
reaching the next level. We will be forming a joint integration team tasked
with identifying and applying the best practices from each company." Meets Strict Financial Criteria "Importantly, this acquisition meets our financial criteria, including average
EBITDA margins that exceed 10 percent and a solid record of revenue growth,
profitability and strong cash flows. There's also a great opportunity to
realize cost synergies of at least $20 million annually," said Jay Braukman,
Chiquita's senior vice president and chief financial officer.
The acquisition is based on expected adjusted 2004 EBITDA for Fresh Express of
$91 million*, including adjustments of $17 million for corporate overhead
allocations, fresh-cut fruit start-up costs and nonrecurring items.
Braukman indicated that the target sources of permanent financing for the
acquisition will include cash as well as debt and convertible preferred
securities.
"We will have a prudent credit profile following the acquisition with net
debt/adjusted EBITDA of approximately 4 times and adjusted EBITDA/interest
coverage of about 3.5 times," said Braukman. "Our strong cash flow will permit
rapid deleveraging and should facilitate the achievement of net debt/EBITDA of
less than 3 times and EBITDA/interest coverage of more than 5 times by 2006."
Braukman also commented that Chiquita intends to maintain its current corporate
credit rating.
Morgan Stanley has acted as financial advisor to the company in connection with
the transaction and has rendered an opinion to the company's board of directors
that the consideration to be paid by the company is fair from a financial point
of view.
Conference Call A conference call to discuss fourth quarter 2004 results as well as the
agreement to acquire Fresh Express will begin at 8:30 a.m. EST today, and will
be available via webcast at http://www.chiquita.com/ . Toll-free telephone
access will be available by dialing 1-800-810-0924 in the United States and
+913-981-4900 from other locations. An audio replay of the call will also be
available until March 3. To access, dial 1-888-203-1112 from the United States
and +719-457-0820 from international locations and enter the access code
7419970. An audio webcast of the call will be available at
http://www.chiquita.com/ until March 9. A transcript of the call will be
available on the web site for 12 months.
About Fresh Express The Fresh Express brand has earned the No. 1 share at 40 percent in the $2.7
billion retail value-added salads market, a fast-growing food category for
grocery retailers, foodservice providers and quick-service restaurants. The
company sells approximately $1 billion annually in value-added salads, all of
which are marketed under the Fresh Express brand. In addition to its wide
variety of salad products, the company is a leading supplier of fresh-cut
fruit. The company operates a network of nine U.S. processing and distribution
facilities.
About Chiquita Brands International Chiquita Brands International is a leading international marketer, producer and
distributor of high-quality bananas and other fresh produce, which are sold
primarily under Chiquita(R) premium brands and related trademarks. The company
is one of the largest banana producers in the world and a major supplier of
bananas in Europe and North America. The company also distributes and markets
fresh-cut fruit and other branded, value-added fruit products. Additional
information is available at http://www.chiquita.com/ .
This press release contains certain statements that are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of Chiquita, including: the
impact of changes in the E.U. banana import regime as a result of the
anticipated conversion to a tariff-only regime in 2006; natural disasters and
unusual weather conditions; currency exchange rate fluctuations; prices for
Chiquita products; availability and costs of products and raw materials;
operating efficiencies; the company's ability to realize its announced
productivity improvements; the company's ability to integrate successfully any
acquired businesses; risks inherent in operating in foreign countries,
including government regulation, currency restrictions and other restraints,
burdensome taxes, risks of expropriation, threats to employees, political
instability and terrorist activities, including extortion, and risks of U.S. and foreign governmental action in relation to the company; the outcome of the
Department of Justice investigation related to the company's Colombian
subsidiary sold in 2004; labor relations; actions of governmental bodies; the
continuing availability of financing; and other market and competitive
conditions.
Any forward-looking statements made in this press release speak as of the date
made and are not guarantees of future performance. Actual results or
developments may differ materially from the expectations expressed or implied
in the forward-looking statements, and the company undertakes no obligation to
update any such statements. Additional information on factors that could
influence Chiquita's financial results is included in its SEC filings,
including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
* See reconciliation in Exhibit A at the end of this release. Exhibit A:
Expected 2004 Adjusted EBITDA Reconciliation ($ millions) Fresh
Express CBII Consolidated
(Expected) (Actual) Pro forma(a) Net income $12.3 $55.4 $67.7
Addbacks:
Depreciation/amortization expense 33.7 41.6 75.3
Net interest expense 19.7 32.7 52.4
Loss on asset sales 8.4 8.4
Other expense 19.4 19.4
Tax expense 7.9 5.4 13.3
EBITDA - unadjusted $73.6 $162.9 $236.4 Adjustments
Restructuring charge 9.2 9.2
Corporate allocations 10.4 10.4
Nonrecurring charges 3.7 3.7
Fresh fruit start-up 3.1 3.1
Total adjustments 17.2 9.2 26.4 Adjusted Pro Forma EBITDA $90.7 $172.1 $262.8 (a) Consolidated pro forma before effects of acquisition and related
financing. DATASOURCE: Chiquita Brands International, Inc.
CONTACT: Michael Mitchell of Chiquita Brands International, Inc., +1-513-784-8959, Web site: http://www.chiquita.com/
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