An influential group that last month advised Chiquita Brands International (NYSE: CQB) shareholders to vote against the proposed merger with Ireland-based Fyffes Plc (ESM: FFY) has backtracked on its decision. 

Institutional Shareholder Services (ISS) is now recommending shareholders to support the Chiquita-Fyffes deal and disregard an all-cash offer from a consortium of Brazilian bidders, the Cutrale Group and the Safra Group.

The unexpected reversal comes after Chiquita and Fyffes restructured their deal to make it more attractive for Chiquita shareholders, and after the Brazilian group made its definitive offer of US$14 a share last week that was later rejected.

"After reviewing the value and relative certainty of the two competing transactions, as well as the appropriateness of the target board's response to the unsolicited bid, ISS has concluded that the $14.00 Cutrale/Safra offer, while higher than Chiquita closing prices immediately prior to the Cutrale/Safra's first bid, does not provide sufficient compensation to Chiquita shareholders to warrant giving up on the potential upside of the revised Fyffes transaction," ISS said in a statement.

"While the Cutrale/Safra cash bid appears to offer relative certainty of value, it does not appear to offer a sufficient premium to the value of the ChiquitaFyffes combination, as indicated by present value of 2016 EBITDA and free cash flow multiples.

"As the target board's response to the unsolicited bid appears to have been appropriate — leading, ultimately, to improvements in both offers prior to the definitive shareholder vote — there does not appear to be any credible evidence the Chiquita board has not been acting in shareholders' best interest."

Chiquita shareholders are due to vote on the proposed merger with Fyffes this Friday (Oct. 24).

In response to ISS' change of tune, Chiquita president and CEO Ed Longergan said he was pleased the advisory group now recognized the increased value provided to shareholders, including an improved exchange ratio and increased synergies estimates.

"The Chiquita Board continues to strongly believe in the strategic merits and value provided by the revised ChiquitaFyffes transaction, which it believes will create a combined company that is better positioned to succeed in a highly competitive marketplace, while driving strong performance and value for shareholders," he said in a release.

"We look forward to completing the transaction expeditiously and urge shareholders to follow ISS' recommendation by voting "FOR" the proposed combination with Fyffes."

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