CHICAGO, June 13 (Reuters) – U.S. grains merchant Bunke ( BG.N ) and Glencore ( GLEN.L )-backed Viterra are merging to create an agricultural trading company valued at about $34 billion, including debt, the companies said on Tuesday. A deal that could be subject to closer regulatory scrutiny.
The deal brings the company closer to global rivals Archer-Daniels-Midland ( ADM.N ) and Cargill ( CARG.UL ), valuing Bunge and Viterra at $17 billion each. Banke shareholders, however, will hold around 70% stake in the joint venture as Banke will pay a significant portion of the deal 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 stock valued at approximately $6.2 billion and approximately $2 billion in cash.
Bunge will assume $9.8 billion of Viterra’s debt, according to a joint statement.
Bunge is already the world’s largest oilseeds processor and analysts said it and Viterra’s crushing businesses could face regulatory scrutiny in Canada and Argentina.
Last year, Bunge was the largest exporter of corn and soybeans from Brazil, the world’s leading source of staple crops for animal feed and biofuels, according to data from shipping agent Garcone. Viterra is the third largest corn exporter and the 7th largest soybean exporter.
Combined, the companies accounted for 23.7% of Brazil corn exports and 20.9% of Brazil soybean exports in 2022, Garconave data shows.
In the United States, Viterra’s grain buying and selling business expanded last year with the acquisition of Gavilon. The merger will boost Bunge’s grain export and oilseeds processing businesses into the world’s No. 2 corn and soybean exporter, marginally ahead of ADM and Cargill.
The deal expands Bunge’s physical grain storage and handling capacity in major wheat exporter Australia, where the company currently operates two grain elevators and a port terminal in the western part of the country. Viterra has 55 storage sites and six bulk grain export terminals in South Australia and Western Victoria.
Bunge’s management team, led by CEO Greg Heckman, who took the helm when the company was a takeover target in 2019, will oversee the combined company.
Heckman oversaw a portfolio review that led Bunge to scale back or sell underperforming operations such as South American sugar and Mexican wheat milling, and invest in its core cooking oil business. The company posted record revenue last year after quarterly losses in 2018. Heckman previously led Gavilon from 2008 to 2015.
The Consumers Federation of America said the deal would reduce competition for farmers’ crops and consolidate the processing of oilseeds used to make plant-based foods and biofuels.
“Further concentration could harm consumers and businesses like plant-based food producers who rely on these ingredients,” said Thomas Gremilian, the federation’s director of food policy.
Bunge said it plans to buy back $2 billion of its stock to boost adjusted profits from the deal. The deal is backed by a $7 billion financing commitment from Sumitomo Mitsui Banking Corporation (SMBC).
Vetera shareholders will own 30% of the combined company following the deal’s expected closing in mid-2024, and about 33% after the repurchase program is completed.
Bunge, the world’s top vegetable oil producer, has partnered with oil major Chevron ( CVX.N ) and seeds and chemicals giant Bayer ( BAYGn.DE ) to boost demand for renewable fuel feedstocks.
In Ukraine, the world’s leading sunflower producer and largest supplier of sunflower oil, the combined Bunge-Viterra will have three oilseed processing plants in the south and east of the country – in Kharkiv, Dnipro and Mykolaiv.
Acquiring Viterra would bring Bunge’s revenue to $67.2 billion in 2022, more in line with ADM’s revenue, which posted sales of nearly $102 billion last year.
In early 2017, Viterra, then known as Glencore Agriculture, attempted to acquire Pange, valuing it at $11 billion. The attempt was rejected.
The merger is expected to generate annual gross pre-tax operating synergies of approximately $250 million over three years.
Carl Bloom and Tom Polanzek in Chicago, Anirban Sen in New York, Arunima Kumar and Mrinalika Roy in Bangalore Reporting by Caroline Stauffer, Matthew Lewis, Devika Syamnath, Kirsten Donovan.
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The Chicago-based senior commodities reporter specializes in agricultural markets, large agribusiness and the food supply chain, as well as global trade, agricultural technology and climate change.
Anirban Sen is the editor-in-chief of US M&A at Reuters in New York, where he leads coverage of mega-deals. After starting Reuters in Bangalore in 2009, Anirban left in 2013 to work as a tech deals reporter at several of India’s leading business news outlets, including The Economic Times and Mint. Anirban rejoined Reuters in 2019 to lead the finance, reporting team, covering everything from investment banking to venture capital. Anirban holds a degree in History from Jadavpur University and a Post Graduate Diploma in Journalism from the Indian Institute of Journalism and New Media. Contact:+1 (646) 705 9409