Viterra shareholders will own 30 percent of the combined company by the closure of the deal by mid-2024
Glencore-backed Viterra and American agribusiness and food company Bunge are all set to merge creating an agricultural trading behemoth worth $34 billion including debt, according to company statements. The merger will bring the agricultural trading giant closer, on a larger global scale, to leading rivals like Cargill and Archer-Daniels-Midland.
Viterra and Bunge will have a $17 billion value each. Nearly 70 percent of the company, however, will be owned by Bunge as the company will pay for a significant amount of the deal with cash. There are also chances of possible regulatory scrutiny over the deal. This is undoubtedly one of the biggest deals in the global agricultural sector and comes after Bunge posted a record-adjusted profit in the year 2022 as they benefitted from scarce global grain supply due to the Russia-Ukraine war.
Deal details
According to the guidelines of the agreed merger, Viterra shareholders will receive nearly $65.6 million shares of Bunge stock, carrying a value of about $6.2 billion, and almost $2 billion in cash. Viterra shareholders will own 30 percent of the combined company by the closure of the deal by mid-2024. The chief executive of Bunge, Greg Heckman, stated that the companies are highly complementary. “The way the assets and teams fit together, the strategic merit is one that we’ve looked at for years … Things just finally aligned,” added Heckman.
Bunge share also rose more than 2 percent. According to the joint statement, Bunge will also assume $9.8 billion of Viterra’s debt. Bunge is among the world’s largest oilseed processors, while Viterra’s business was having a hard time and this could also invite regulatory scrutiny in Argentina and Canada. Authorities in Canada will review the planned merger while authorities in Argentina haven’t received a formal notification of the merger, reports Reuters.
Viterra was the number 7 soybean shipper and the third-largets corn exporter. Bunge, last year, was the largest soybean and corn exporter from Brazil, which is also the world’s top source of staple crops for making biofuels. The merger would enhance Bunge’s oilseed processing business in the world’s No.2 soy and corn exporter. Bunge’s physical grain storage capacity and handling capacity expanded with the deal in Australia, where the company currently operates on a smaller scale with a port terminal and just two-grain elevators in the western part of the country. Viterra on the other hand 55 storage sites in Western Victoria and South Australia and six bulk grain export terminals.
Bringing down the competition
Greg Heckman and the management team of Bunge will supervise the combined entity. The Consumer Federation of America stated that the deal would reduce the competition for farmers’ crops and consolidate the processing of oilseeds used to make biofuel and plant-based foods at a time when the Biden administration is promoting competition in the economy. The director of food policy for the Federation, Thomas Gremillion, stated that additional concentration would harm consumers and businesses alike like plant-based food manufacturers.
Bunge mentions that it plans to repurchase $2 billion of its stock to enhance amassing from the deal to adjusted profit. The deal is also backed by the Sumitomo Mitsui Banking Corporation (SMBC) by financing $7 billion. British Columbia Investment Management Corp and Canada Pension Plan Investment Board (CPPIB) are in support of the deal, mentioning that all Viterra shareholders are on board. The combined entity would have three oilseed processing across Ukraine’s east and south regions- Dnipro, Kharkiv, and Mykolaiv. Acquiring Viterra would bring Bunge more in line with ADM which recorded sales of $102 billion last year. The merger is also expected to bring nearly $250 million of annual gross pre-tax tax operational synergy within three years.