Bunge, a grains merchant based in the United States, and Viterra, which is backed by Glencore, have announced their merger to form a significant player in agricultural trading. The combined company’s value, including debt, is estimated to be around $34 billion.
This deal is likely to face close regulatory scrutiny. The merger positions the new company as a global competitor to leading firms like Archer-Daniels-Midland and Cargill, with Bunge and Viterra being valued at approximately $17 billion each.
Bunge shareholders will own around 70% of the merged entity as a result of their significant cash contribution to the deal.
This merger represents an unprecedented scale within the global agriculture industry. It follows Bunge’s remarkable achievement of record-adjusted profits in 2022, which were boosted by the restricted global grain supplies resulting from the Ukraine conflict.
The announcement of the merger caused Bunge’s stock to increase by more than 2%.
As part of the agreement, Viterra shareholders will receive approximately 65.6 million shares of Bunge stock, amounting to approximately $6.2 billion in value, along with $2 billion in cash.
Additionally, Bunge will assume Viterra’s debt of $9.8 billion. Once the deal is finalized, Viterra shareholders will hold a 30% stake in the combined company, expected to occur by mid-2024.
The merger is seen as a strategic fit, with Bunge’s CEO Greg Heckman emphasizing the complementary nature of the company’s assets and teams. The terms of the deal were initially reported by Reuters on June 8.
Bunge is already the largest processor of oilseeds globally, and industry analysts anticipate regulatory scrutiny for its crushing businesses in Canada, Argentina, and other markets. Canada’s antitrust regulator has confirmed that it will review the merger, while Argentina’s competition bureau is yet to receive a formal notification.
Last year, Bunge was the leading exporter of corn and soybeans from Brazil, the world’s primary source for these crops used in animal feed and biofuels. Viterra, on the other hand, ranked as the third-largest corn exporter and the seventh-largest soybean shipper.
Bunge and Viterra Merger
In the United States, Viterra expanded its grain buying and selling operations through the acquisition of Gavilon in the previous year.
The merger will strengthen Bunge’s grain exporting and oilseed processing businesses in the second-largest corn and soy exporter globally, where it currently has a smaller presence compared to ADM and Cargill. Fitch Ratings has indicated that
Bunge’s BBB rating could potentially be upgraded to BBB+ if the merger is successfully completed. Bunge’s CFO, John Neppl, stated in an interview that the company’s sustained annual earnings target after the merger is a reasonable $4 billion.
The merger between Bunge and Viterra, under the leadership of CEO Greg Heckman, who assumed the role in 2019 when Bunge was itself a target for acquisition, could lead to potential competition concerns.
Heckman conducted a thorough evaluation of the portfolio, leading to the reduction or divestment of underperforming ventures like South American sugar and Mexican wheat milling.
The company shifted its focus towards strengthening the core business of edible oils. Bunge experienced record earnings last year after facing quarterly losses in 2018. Prior to Bunge, Heckman served as the CEO of Gavilon from 2008 to 2015.
Bunge has announced its plan to repurchase $2 billion of its own stock to enhance the positive impact of the deal on adjusted profit. The financing commitment of $7 billion from Sumitomo Mitsui Banking Corporation (SMBC) supports the merger.
The Canada Pension Plan Investment Board (CPPIB) and British Columbia Investment Management Corp have indicated their support for the deal, signaling unanimous approval from all Viterra shareholders. CPPIB stated that it would hold a 12% stake in the combined company.
By acquiring Viterra, Bunge’s revenue, which reached $67.2 billion in 2022, would align more closely with that of ADM, a company that reported sales of nearly $102 billion in the previous year.
The merger is expected to result in approximately $250 million in annual gross pre-tax operational synergies over a span of three years.
