Fyffes became Britain's largest banana supplier yesterday when its deal to acquire Geest's banana interests cleared the final hurdle. Geest, whose remaining operations include a prepared foods and sauces business, is now expected to become a takeover target with some analysts expecting a bid within the next few months.
Shareholders in both Geest and Fyffes voted separately to approve the pounds 147.5m deal in which Fyffes has combined with Wibdeco, a Windward Islands trading group. The sale is expected to be completed tomorrow.
The deal gives Fyffes control of almost 50 per cent of the UK banana supply market. However, competition authorities have allowed the deals as Fyffes will control less than 20 per cent of the European market.
Fyffes is expected to make some disposals including the possible sale of Geest's Costa Rican banana farm and two large ships.
However, analysts said the deal would make little difference to the UK's supply of bananas. The quotas which restrict the export of cheaper "dollar" bananas from central American producers to Europe will remain in place.
Geest will book pounds 21.5m as a result of its banana sale. However, analysts now expect the remainder of the company to be swallowed by a rival food group such as Unigate, Hillsdown and Northern Foods which all have prepared food divisions. Geest's remaining operations have modern well invested factories which manufacture own label products such as ready made meals and pasta sauces for the supermarket groups. This is a growing market and most of the major food groups are keen to expand further in this area.
Informal talks are thought to have taken place between Geest and other food groups before the banana sale. However no discussions are thought to be taken place at the moment.
City analysts are divided on a likely bid price. BZW suggests a possible take-out price of 250p per share, compared to yesterday's closing price of 210p.
One view is that after stripping out bid speculation, the true trading level of the shares is around 170-175p with a bid price little higher than the current level.