BUSINESS
09/07/2014 02:47 pm ET Updated Sep 07, 2014

Chiquita's Tax Inversion Deal Could Be In Trouble

Bloomberg via Getty Images

Banana giant Chiquita Brands International’s plan to move to Ireland to dodge U.S. taxes may be in trouble.

Institutional Shareholder Services, an influential firm that advises investors, urged shareholders to vote against Chiquita’s plan to merge with Irish rival Fyffes. Instead, the company should accept a joint takeover bid by two Brazilian firms, ISS said in an analysis on Friday.

Chiquita rejected the $625 million offer from orange juice behemoth Cutrale Group and investment bank Safra Group last month, and reaffirmed its plan to create the world’s largest banana company by merging with Fyffes. The combined company, dubbed ChiquitaFyffes PLC, would be headquartered in low-tax Ireland.

Charlotte, N.C.-based Chiquita could face boycotts over its plan to split to Ireland in the so-called tax inversion deal. Tax inversions occur when a larger American company merges with a smaller foreign firm and moves overseas to skirt U.S. corporate taxes, which are among the highest in the world.

The tactic, which has become increasingly popular over the last year, is facing intense political backlash as several high-ranking senators and the White House are exploring legal options to make inversions more difficult.

Under the threat of a national boycott, drugstore chain Walgreen abandoned its plan last month to re-incorporate in Switzerland after merging with European rival Alliance Boots. Late last month, Burger King announced a deal to buy doughnut and coffee chain Tim Hortons and move to Canada. A similar chorus of voices called for boycotts against Burger King, though it remains unclear whether activists can organize enough customers to protest the fast-food giant.

Still, ISS said investors’ excitement over Chiquita’s tax inversion deal, first announced in March, has waned in recent months.

“The apparently declining market enthusiasm for the transaction over the months after the announcement,” the advisory firm wrote in its analysis, “and the potential to realize greater economic value through an alternative transaction -- as demonstrated by a higher cash offer from another potential strategic buyer -- suggest support for the transaction as currently structured is not warranted.”

Steve Himes, a spokesman for Chiquita, did not respond to the The Huffington Post's request for comment on Sunday.

CONVERSATIONS