Fyffes' imminent new Japanese owner, Sumitomo Corporation, has signalled it may sell the tropical fruits distributor's 40 per cent stake in property company, Balmoral International Land Holdings.
"We're not in the real estate business," Ted Eguchi, senior vice-president and general manager of Sumitomo's food business, told The Irish Times last week. The stake "is an important asset from a balance sheet standpoint, but the operation itself is not really within what we're trying to do. We'll have to make a decision as to what we'll do with it".
Sumitomo secured approval from Fyffes shareholders last Monday to take over the Irish company for €751 million. The deal is expected to be completed by the end of next month.
Fyffes spun off and listed its property portfolio in 2006 on the junior Dublin and London stock markets as a company called Blackrock International Land. The value of the real estate assets at the time was almost €200 million and comprised of 30 properties, almost half of which were rented out to Fyffes on short- to medium-term leases.
The company was subsequently renamed as Balmoral in 2010 and delisted from the stock market a year later following a slump in its share price during the downturn.
The total value of the assets was almost €167 million at the end of 2015, while net borrowings were €143.4 million. The company’s net asset value jumped 132 per cent during the year to €19.7 million, according to its most recent annual report.
Value of holding
On that basis, Fyffes’ interest would be worth almost €8 million. However, the group has been valuing its holding at just €50,000 since 2011.
Almost a third of Balmoral's gross rental and related income in 2015 came from Fyffes and Total Produce, a fresh produce distribution company demerged from Fyffes in 2007. Almost a third of the group's portfolios is based in Ireland, with 43 per cent in the UK and the remainder in continental Europe.
Mr Eguchi said Sumitomo’s ultimate decision on what to do with Fyffes’ Balmoral state will have to take the lease agreements into account.
Balmoral “continues to seek to rebuild its net asset value, pursue progress with its development assets and reduce debt”, according to the annual report, signed off on by the directors on September 13th.
Fyffes traces its Irish routes back to 1902, when Charles McCann set up a fruit-and-vegetable shop in Dundalk in 1902. His grandson, David, is executive chairman of Fyffes, while another grandson, Carl, is chairman of Total Produce and Balmoral.
The McCann family’s Balkan Investments company owns almost 12 per cent of both Fyffes and and Total Produce, and about 6.4 per cent of Balmoral.
