Fyffes buys 70% of Czech food producer

Fruit distribution company Fyffes yesterday announced the purchase of 70 per cent of leading Czech Republic fresh food producer Hortim International for up to €22.25 million.

The deal involves an initial payment of €10.25 million with the potential for further payments totalling €12 million over the next four years subject to Hortim's meeting certain earnings before interest and tax depreciation and amortisation (EBITDA) growth targets. Fyffes said in a statement that all of the potential €22.25 million price would be paid in cash.

Hortim, which is based in Brno, has six plants between the Czech and Slovak republics employing 600 people.

It had a turnover of €100 million in the year to December 31st, 2001, with profits before tax of €1.9 million and net assets of €9.9 million.

Fyffes expects the acquisition to be earnings enhancing from the date of completion, which is due to be within the next month, it said.

Fyffes vice-chairman Mr Carl McCann said the acquisition of the Czech company was significant for Fyffes in the run-up to the Czech Republic joining the EU in 2004.

"This transaction offers significant growth opportunities, as well as a continuation of our development strategy of acquiring businesses in our sector.

"We are pleased to become shareholders in Hortim and look forward to working together with [Hortim founder Mr\] Zdenek Hort and his team."

The Czech acquisition comes less than three months after Fyffes announced it was targeting a major acquisition in Europe where a deal would offer synergies.

At that time, the company said it would use its €150 million cash pile to target acquisitions rather than buy back shares.

Earlier in the year, Fyffes was at the centre of market speculation regarding whether it would acquire, or be acquired by, a number of international peers.

It has been mentioned as a possible bidder for US group Chiquita, which has recently emerged from Chapter 11 bankruptcy protection.

It was also tipped to be on the takeover radar of US company Dole, which made an unsuccessful approach to Fyffes in the mid-1990s.

The company is understood to have become an attractive proposition for a number of potential international bidders because its share price of late has performed well below other groups in the fresh food sector.

In May, Fyffes chairman Mr Neil McCann told the company's annual meeting he had no explanation as to why the Irish group's share price had lagged so far behind its competitors.