THE fruit distribution group, Fyffes, is to withdraw from banana distribution in the United States, two and a half years after trying to break into the American market.
The cash generated from the sale of Fyffes' banana farming business in Guatemala which supplied the US operations would be used to continue expanding the group's European business.
Fyffes announced that it had sold its 50 per cent interest in Banana Trading Corporation in Guatemala to the American multi-national Dole Food for a total of $26.3 million (£14.3 million), of which $19.3 million will be paid immediately and a further $7 million in four months time. The proceeds equate to the book value of the assets being sold.
Fyffes established its banana marketing business in the US in 1994, with a target of building up sales of up to two million boxes of bananas. The market in the US has been difficult, however, and Fyffes' marketing operations have been unprofitable. "Consequently, the group has decided to dispose of them," Fyffes deputy chairman Mr Carl McCann said.
Mr McCann said that the American operations had sales last year of £28 million but had operating losses of around £1 million. "It was never a question of not getting sales, it was a question of profits," he said, adding that the American operations accounted for around 3 per cent of Fyffes' annual sales.
We didn't have the synergies of the bigger players like Chiquita and Dole, and we didn't have brand recognition that we in Europe." The closure of the IS operations would not involve any exceptional charges in the accounts, but the closure would boost earnings through the elimination of the £1 million operating losses.
Fyffes has also set up a new shipping arrangement, where Dole's large banana boats would be used to transport about 15 per cent of Fyffes' total supplies bananas. The deal would benefit both Dole and Fyffes, said Mr McCann, with both companies benefiting from greater economies of scale.
Dole is one of the world's biggest fresh produce multi-nationals and was involved in detailed discussions on a takeover of Fyffes four years ago. Dole offered £423 million for Fyffes at that time, but the deal was abandoned when the two parties failed to agree on price.
Since then, there has been periodic speculation that Dole's interest in Fyffes would be reawakened, especially given that the Irish group's supplies both African and Caribbean (ACP) and "dollar" bananas for the European market.
