© Reuters. FILE PHOTO: Bunge Ltd emblem is seen displayed on this illustration taken, April 10, 2023. REUTERS/Dado Ruvic/Illustration
By Karl Plume and Anirban Sen
CHICAGO (Reuters) -U.S. grains service provider Bunge (NYSE:) and Glencore-backed Viterra are merging to create an agricultural buying and selling large price about $34 billion together with debt, the businesses mentioned on Tuesday, in a deal that can seemingly draw shut regulatory scrutiny.
The deal brings the mixed firm nearer in world scale to main rivals Archer-Daniels-Midland and Cargill, valuing Bunge and Viterra at about $17 billion every. Bunge shareholders, nonetheless, will personal about 70% of the mixed firm, as a result of Bunge can pay for a major chunk of the take care of money.
Shares of Bunge fell 2.5% to $91.45 in premarket buying and selling.
Below the deal, Viterra shareholders will get about 65.6 million shares of Bunge inventory, carrying a price of about $6.2 billion, and about $2 billion in money.
Bunge will even assume $9.8 billion of Viterra’s debt, in line with a joint assertion.
Bunge is already the world’s largest oilseed processor and analysts mentioned it and Viterra’s crushing companies may face regulatory scrutiny in Canada and Argentina.
Final yr, Bunge was the biggest corn and soybean exporter from Brazil, the world’s high supply of the staple crops for making animal feed and biofuels, in line with knowledge from delivery agent Cargonave. Viterra was the third-largest corn exporter and No. 7 soybean shipper.
Mixed, the businesses accounted for about 23.7% of Brazil corn exports in 2022 and 20.9% of Brazil soybean exports, Cargonave knowledge confirmed.
In america, Viterra’s enterprise of shopping for and promoting grain expanded through its buy of Gavilon final yr. The merger would improve Bunge’s grain exporting and oilseed processing companies on the planet’s No. 2 corn and soy exporter, the place it has a smaller presence than ADM and Cargill.
The deal additionally expands Bunge’s bodily grain storage and dealing with capability in main wheat exporter Australia, the place the corporate presently operates simply two grain elevators and a port terminal within the western a part of the nation. Viterra has 55 storage websites in South Australia and western Victoria and 6 bulk grain export terminals.
Bunge’s administration staff, led by CEO Greg Heckman who took excessive position in 2019 when the corporate itself was a takeover goal, will oversee the mixed entity.
Heckman oversaw a portfolio evaluation that led Bunge to cut back or promote underperforming operations similar to South American sugar and Mexican wheat milling, and spend money on its core edible oils enterprise. The corporate reported report earnings final yr after a string of quarterly losses in 2018. Heckman beforehand led Gavilon from 2008 to 2015.
The Shopper Federation of America mentioned the deal would scale back competitors for farmers’ crops and consolidate processing of oilseeds used to make plant-based meals in addition to biofuel.
“Additional focus appears prone to hurt customers and the companies, like plant-based meals producers, that depend on these commodities,” mentioned Thomas Gremillion, director of meals coverage for the Federation.
Bunge mentioned it plans to repurchase $2 billion of its inventory to boost accretion from the deal to adjusted revenue. The deal is being backed by a financing dedication of $7 billion from Sumitomo Mitsui (NYSE:) Banking Company (SMBC).
Viterra shareholders will personal 30% of the mixed firm following the deal’s anticipated shut in mid-2024, and about 33% after completion of the repurchase plan.
The world’s high vegetable oils producer Bunge had additionally entered partnerships with oil main Chevron (NYSE:) and seeds and chemical substances large Bayer (OTC:) to pursue hovering demand for renewable fuels feedstocks.
In Ukraine, the world’s high sunflower producer and largest provider of sunflower oil, a mixed Bunge-Viterra would have three oilseed processing vegetation throughout the nation’s south and east – in Kharkiv, Dnipro and Mykolaiv.
Buying Viterra would carry Bunge’s income, which was $67.2 billion in 2022, extra in keeping with that of ADM, which registered gross sales of almost $102 billion final yr.
In early 2017, Viterra, then generally known as Glencore (OTC:) Agriculture, tried a takeover of Bunge, which was then valued at $11 billion. The try was rebuffed.
The merger is anticipated to generate about $250 million of annual gross pre-tax operational synergies inside three years.
