Fyffes has agreed to spend about €50 million on the purchase of a fresh produce distributor in Sweden.

The fruit firm will buy 60 per cent of the Everfresh group of companies immediately and has agreed to pick up the remaining 40 per cent in 2007.

Fyffes said the first phase of the deal would be earnings-enhancing as soon as it is completed over the next two to three months. Market sources suggested that the full purchase could add 10 per cent to Fyffes's earnings per share in 2007.

Under the terms of the transaction, Fyffes will pay €28.7 million for the 60 per cent of Everfresh that it is buying now, with the final consideration due in 2007 to be linked to the Swedish firm's profits over the next three years.

The maximum that can be paid for the whole company under this arrangement is €77.6 million. It is expected however it should make average annual pre-tax profits of €7 or €8 million between now and 2007, thus leaving the full price paid by Fyffes in the region of €50 million.

Fyffes will fund both parts of the purchase from its cash reserves, which stood at €173 million at the end of 2003.

The efficiency of this cash pile has been questioned in the past by analysts who wonder when it might be used to fund a more substantial acquisition.

The company spent €3.7 million on taking advice on a possible single acquisition - believed to be a deal with Fresh Del Monte - over the course of the past year but negotiations failed in the end.

A spokesman for Fyffes said yesterday the company was not afraid to do a bigger deal, but was not prepared to "hang around" waiting for it either.

Everfresh was founded in 1987 and has since grown to hold about 25 per cent of the Swedish fruit distribution market. It also operates a distribution depot in Finland and has a group turnover of about €300 million. It recorded pre-tax profits of €4.4 million last year.

When combined with Fyffes' existing business in Denmark, the acquisition will allow Scandinavian turnover at the group to rise to €500 million. This would make Fyffes the largest distributor in the region.

The main beneficiary of the acquisition is believed to be Everfresh chief executive Mr Bengt Nilsson, who will continue to run the company.