"I'm Chiquita banana and I've come to say... "
You may not remember the jingle, but Chiquita Brands
That's right. Chiquita sold its Colombian banana-producing and port operations for $28.5 million in cash, $15 million in notes and deferred payments, and the assumption of $8 million in pension liabilities. The transaction, which includes agreements to buy bananas and pineapples, is expected to result in a loss of $5 million.
Shareholders will nonetheless relish the loss of the operations inside war-torn Colombia. In April 2003, the company disclosed that it made payments for the "protection of employees" to groups designated as foreign terrorist organizations. Although the sale will not stop a U.S. Department of Justice investigation into the payments, it does allow investors to look at the company with a fresh view.
The sale also delivers on the company's promise to reduce debt. When Wells Fargo
Debt reduction is particularly beneficial given that close rival and Motley Fool Hidden Gems recommendation Fresh Del Monte Produce
Still, before discarding Chiquita like a banana peel, note that the stock sells for just 8.7 times trailing earnings. Elsewhere in food, Albertsons
Bananas still pay the bills at Chiquita, accounting for more than half of the revenue stream. It's a tough commodity business, but the company has a target of earning 30% of total revenue from higher-margin segments by 2007. If only based on what it has managed in reducing the debt, this management team has credibility. At so modest a multiple to earnings, and with the Colombia operations off its back, Chiquita at least warrants a fresh new look.
Spend some time talking to other investors about Chiquita or Fresh Del Monte on our discussion boards.
Fool contributor W.D. Crotty owns stock in Wells Fargo.
