Chiquita may be the next major corporation to split from the U.S. to avoid taxes.
The banana giant rejected a $625 million buyout bid by Brazilian orange behemoth Cutrale Group and conglomerate Safra Group on Thursday and said it means to go ahead with a planned merger with Irish rival Fyffes. The combined company is then expected to register in low-tax Ireland in what is known as a tax inversion -- essentially renouncing U.S. corporate citizenship.
“Chiquita remains committed to completing its transaction with Fyffes, which it believes will create a combined company that is better positioned to succeed in a highly competitive marketplace,” the company said in a statement on Thursday.
Chiquita, which is based in Charlotte, N.C., originally inked a deal to acquire Fyffes in March.
But a lot has changed since March, with such inversion deals increasingly facing public scorn. Inversions have lately become a political target of several high-ranking lawmakers in Congress. President Barack Obama has considered an executive order to close the tax loophole and said of the practice earlier this month that “it’s not right.”
And a week ago, boycott threats forced drugstore-chain operator Walgreen to abandon its plan to re-incorporate in Switzerland after merging with European competitor Alliance Boots in an inversion deal.
Chiquita could be the next company to face such a backlash, according to Roger Hickey, the co-director of Campaign for America’s Future, a progressive nonprofit that collected more than 300,000 signatures on a petition against Walgreen.
“There will be a strong reaction,” Hickey told The Huffington Post on Friday. “Chiquita brands is very, very well-known, and they could be vulnerable to a boycott as well.”
Unlike Walgreen, which stood to save $4 billion over the next five years, Chiquita has said it would receive little immediate benefit from its move to Ireland. But nonprofit tax groups told HuffPost they suspect long-term benefits are driving the inversion deal.
“Our sense is Chiquita is hiding something in the deal by not publicly acknowledging and not publicly stating what kind of advantage they’re getting from this,” Frank Clemente, the executive director of Americans for Tax Fairness, told HuffPost. “The reason we think they’re doing this is to avoid bad publicity.”
Ed Loyd, a spokesman for Chiquita, did not return a call requesting comment.
Chiquita also had about $1.7 billion in profits parked offshore last December, according to documents filed with the Securities and Exchange Commission last March. If it pledges allegiance to Ireland’s tricolored flag, it can avoid paying U.S. taxes on that money, Rebecca Wilkins, senior counsel at Citizens for Tax Justice, told HuffPost.
“Instead, if they do the inversion transaction," she said, "over time, through fairly complicated legal and accounting maneuvers, they can move that money out of tax-haven subsidiaries to the new parent company and eventually get all of it.”