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.

The post Sumitomo makes an offer for Fyffes but will the deal go ahead this time? appeared first on The Twelfth Magpie.

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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.

Fyffes is best known for its bananas, though the Dublin-headquartered firm imports a number of different tropical fruits, including pineapples and melons. A growing Western appetite for such exotics has brought in handsome profits for Fyffes shareholders over the past five years, but is there more to come or are you treading on slippery skins if you buy now?

Growing profits

Between 2010 and 2014, pre-tax profit at Fyffes more than quadrupled to €39m, although earnings per share gained a more modest (but still respectable) 37% over the same period.

Looking at dividend yields, you could be forgiven for not being impressed, as they’ve dropped from a peak of 4.4% in 2011 to just 2.2% in 2014, and forecasts suggest only 1.6% this year. But that’s all down to the soaring share price, and hides a dividend that has actually been rising a long way ahead of inflation — the full-year payout for 2014 was lifted by 10% on of the previous year, and the annual payment is always very well covered by earnings.

Fyffes released interim figures in August and they looked impressive indeed, with chairman David McCann speaking of “a continuation of the strong growth in earnings achieved in recent years, with a 12.2% increase in Adjusted EPS in the first half…“, and the interim dividend was lifted 12.2%.

Upbeat guidance

The company, unusually for an AIM-listed one, also gave us some full-year guidance, suggesting adjusted EBITDA of between €55m and €61m, with full-year adjusted EPS expected to come in at 12.2 cents to 13.9 cents per share — though admittedly these adjusted figures are hard to compare with reported reality.

Is Fyffes one to buy now? Well, there are only three analysts’ recommendations out there right now, including the company’s own broker, all on Strong Buy ratings. And it really depends on your take on the continuation of the growth story.

Further growth to come?

Forecasts suggest a 16% boost to EPS this year followed by a smaller 2% in 2016, but it’s the years beyond that that really count. If Fyffes genuinely can keep the past five years’ growth going, then a forward P/E multiple of around 11.5 for this year and dropping a little for 2016 could still indicate decent value, even if that predicted 1.6% dividend yield might not look too impressive.

The post Should You Grab Fyffes PLC ORD’s Bananas? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft 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.