Bunge and Glencore-backed Viterra to merge, creating $34bn agri-trade giant
The global agricultural trading sector is set to see a major transformation as US grains merchants Bunge and Glencore-backed Viterra plan to merge, creating a $34bn giant, including debt. This deal, announced on Tuesday, will bring the combined company closer to leading rivals Archer-Daniels-Midland and Cargill, valuing both Bunge and Viterra at approximately $17bn each.
Bunge, already the world’s largest oilseed processor, will own around 70% of the company as it will pay for a significant part of the deal with cash. Meanwhile, Viterra shareholders will receive about 65.6 million shares of Bunge stock, worth around US$6.2bn, and approximately US$2bn in cash. The merger follows Bunge’s record adjusted profits in 2022, which were boosted by tight global grain supplies due to Russia’s war on Ukraine.
Bunge CEO Greg Heckman said, “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.” However, the merger is expected to face regulatory scrutiny in Canada, Argentina, and other countries.
Canada’s antitrust regulator will review the planned merger, and Argentina’s competition bureau has not yet received formal notification of the merger. The US Department of Justice and antitrust regulators in the European Union did not respond to requests for comment.
The deal will enhance Bunge’s grain exporting and oilseed processing businesses in the US, where it has a smaller presence than ADM and Cargill. It will also expand Bunge’s physical grain storage and handling capacity in Australia, a major wheat exporter. Bunge’s chief financial officer, John Neppl, told Reuters that sustained annual earnings of $4bn are “a very reasonable target” for the company after the merger.
However, the Consumer Federation of America expressed concerns that the deal would reduce competition for farmers’ crops and consolidate processing of oilseeds used to make plant-based foods and biofuel. Thomas Gremillion, director of food policy for the Federation, said, “Further concentration seems likely to harm consumers and the businesses, like plant-based food manufacturers, that rely on these commodities.”
Bunge plans to repurchase $2bn of its stock to enhance accretion from the deal to adjusted profit. The deal is being backed by a financing commitment of $7bn from Sumitomo Mitsui Banking Corporation (SMBC). Canada Pension Plan Investment Board (CPPIB) and British Columbia Investment Management Corp have also agreed to support the deal, indicating that all Viterra shareholders are on board.
