US grain trader Bunge (BG.N) and Glenore-backed Viterra (GLEN.L) are merging to create an agricultural trading behemoth worth about $34 billion including debt, the companies said on Tuesday. The deal is likely to attract close regulatory scrutiny.
The deal brings the combined company closer in global scope to leading competitors Archer-Daniels-Midland (ADM.N) and Cargill (CARG.UL), with Bungie and Vitra valued at $17 billion each. However, Bunge shareholders will own about 70% of the combined company, because Bunge will pay for a significant portion of the transaction in cash.
Bunge shares fell 2.5% to $91.45 in premarket trading.
Under the deal, Viterra shareholders will receive approximately 65.6 million shares of Bunge stock, valued at approximately $6.2 billion, and approximately $2 billion in cash.
According to a joint statement, Bunge will also assume $9.8 billion in Vetra’s debt.
Bunge is already the world’s largest processor of oilseeds, and analysts said it and its Viterra fracking business could face regulatory scrutiny in Canada and Argentina.
Last year, Bong was the largest exporter of corn and soybeans from Brazil, and the world’s largest exporter of staple crops for the manufacture of animal feed and biofuels, according to data from freight forwarder Cargonave. Viterra was the 3rd largest exporter of corn and the 7th largest shipper of soybeans.
Combined, the companies accounted for about 23.7% of Brazilian corn exports in 2022 and 20.9% of Brazil’s soybean exports, Kargoniev data showed.
In the United States, Viterra’s cereal business expanded via its purchase of Gavilon last year. The merger will boost Bunge’s grain export and oilseed processing businesses into the world’s second-largest corn and soybean exporter, with a smaller presence than ADM and Cargill.
The agreement also expands Bunge’s physical grain storage and handling capacity at Australia’s largest wheat exporter, where the company currently operates just two grain elevators and a port terminal in the western part of the country. Viterra has 55 warehousing sites in South Australia and Western Victoria and six bulk grain export terminals.
Bunge’s management team, led by CEO Greg Heckman who took over the top job in 2019 when the company itself was an acquisition target, will oversee the combined entity.
Hickman oversaw a portfolio review that reduced or sold underperforming operations such as South American sugar and Mexican wheat milling, and invested in its core edible oils business. The company reported record profits last year after a string of quarterly losses in 2018. Hickman previously led Javilon from 2008 to 2015.
The Consumers Federation of America said the deal would reduce competition for farmers’ crops and boost processing of oilseeds used to make plant-based foods as well as biofuels.
“The extra focus appears to be hurting consumers and businesses, such as plant-based food manufacturers, who depend on these commodities,” said Thomas Gremlion, the federation’s director of food policy.
Bungie said it plans to buy back $2 billion of its shares to boost the accretion from the deal to adjusted profit. The deal is backed by a $7 billion financing commitment from Sumitomo Mitsui Banking Corporation (SMBC).
Viterra shareholders will own 30% of the combined company after the transaction is expected to close in mid-2024, and approximately 33% after the completion of the buyback plan.
Bunge, the world’s largest producer of vegetable oils, has also entered into partnerships with oil major Chevron (CVX.N) and seed and chemical giant Bayer (BAYGn.DE) to pursue growing demand for renewable fuel feedstocks.
In Ukraine, the world’s largest producer of sunflower oil and the largest supplier of sunflower oil, the Bunge-Viterra joint venture will have three oilseed processing plants in the south and east of the country – in Kharkiv, Dnipro and Mykolaiv.
The acquisition of Viterra would bring Bunge’s revenue, which was $67.2 billion in 2022, more in line with revenue from ADM, which reported sales of about $102 billion last year.
In early 2017, Viterra, then known as Glencore Agriculture, attempted to take over Bunge, which was valued at $11 billion. The attempt was rejected.
The merger is expected to generate approximately $250 million in total pre-tax operating synergies within three years.
Additional reporting by Carl Blum and Tom Polancic in Chicago, Anirban Sen in New York, Arunima Kumar and Mrinalika Roy in Bengaluru Editing by Caroline Stauffer, Matthew Lewis, Devika Syamnath and Kirsten Donovan
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