Chiquita Brands' successful turnaround

A new CEO and a restructuring suggest improving times for this dominant brand.

By TheStockAdvisors Apr 18, 2013 11:00AM

Toddler in supermarket © Susan Barr Photodisc Getty ImagesBy George Putnam, The Turnaround Letter

Chiquita Brands International (CQB), which traces its history back to a ship captain in 1870, has many of the features that we like to see in a turnaround candidate.

First and foremost, it has a powerful brand. The Chiquita brand dominates the banana market, and it is probably the most widely-recognized name in any form of fresh produce.

The company was hurt by a "banana war" in Europe around the turn of the 20th century and was forced into Chapter 11. It emerged from bankruptcy in 2002 with an improved balance sheet.

In 2005 it acquired Fresh Express, a large producer of packaged salads. Results were variable for several years, but then began to steadily decline in the latter half of 2011.

However, the banana and fresh produce markets are likely to remain strong as consumers around the globe become more health conscious.

Second, Chiquita has a new CEO. In late 2012 the company brought in Edward Lonergan. Prior to coming to Chiquita, Lonergan led the turnaround of a cleaning products company. Before that he had a distinguished career in branded consumer products with Gillette at Procter & Gamble (PG).

Even before Lonergan arrived, the company had begun to restructure its operations. It sold off a number of non-core businesses -- another thing we like to see -- to focus on bananas and salads & healthy snacks. It moved its headquarters, reduced headcount and realigned management to reduce costs and improve efficiencies.

In February of this year Chiquita refinanced much of its balance sheet, pushing the bulk of its debt maturities out to 2021. This gives the company plenty of breathing room to carry out its restructuring plans.

While there is risk in any agricultural product business, we believe that the current stock price represents an attractive level to get into a company with a dominant brand that appears to be well into a turnaround. We recommend buying Chiquita up to $12.

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Tags: CQB
Apr 19, 2013 6:39AM
Back in the 90's, the total stock of Chiquita had fallen to be worth about $2 billion, but the individual parts of the company were worth over $3 billion.  I was amazed some arbitrage expert didn't make a quick billion in profits by dividing it up and selling it off.
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