Bunge and Viterra to Join Forces, Creating a Global Agribusiness Giant
The world of agriculture is set to witness a major transformation as U.S. grain trader and oilseed processor Bunge plans to acquire Glencore-backed Viterra in an $8.2 billion deal. This merger will give rise to one of the largest agricultural companies globally.
Under the terms of the agreement, Bunge will pay Viterra shareholders about 65.6 million shares valued at $6.2 billion, along with $2 billion in cash. Additionally, Bunge will take on Viterra’s debt of $9.8 billion. The combined entity will be led by Bunge’s Chief Executive Greg Heckman and Chief Financial Officer John Neppl.
The merger aims to create a network that connects the world’s major production regions with areas experiencing the fastest-growing consumption. Bunge’s acquisition of Viterra is expected to close in the middle of next year.
Strengthening the Agricultural Trading Business
The planned combination of these two grain shippers comes at a time when agriculture traders, including Bunge, have seen increased profits due to external factors like Russia’s invasion of Ukraine, which caused grain prices to soar.
By acquiring Viterra, Bunge will become a major player in the industry, putting it on par with rivals Archer Daniels Midland and Cargill, with an annual revenue exceeding $100 billion.
Potential Savings and Synergies
In addition to the financial benefits, the merger is expected to generate approximately $250 million in annual operational pretax savings within the first three years. Bunge also plans to repurchase around $2 billion of its own stock.
Post-merger, Viterra shareholders will own approximately 30% of the combined entity. The Bunge board will comprise eight Bunge-nominated representatives and four nominated by Viterra shareholders.
Anticipating Regulatory Scrutiny
Analysts predict that this proposed merger may face scrutiny from antitrust regulators under the Biden administration, which has been keen on preventing deals that could stifle competition. The Federal Trade Commission recently sued Microsoft to block its purchase of Activision Blizzard, while the Justice Department has filed similar lawsuits in various sectors.
Expanding Trading Capabilities and Footprint
Bunge, a major global grain trader, will significantly expand its trading business in the U.S., Canada, and Australia by joining forces with Viterra. This merger will complement Bunge’s existing oilseed processing operations and provide it with trading capabilities in regions where it is currently underrepresented.
A Bright Future for Agriculture Giants
With this strategic move, Bunge is poised for growth in the agricultural industry. The company, which boasts annual sales of $67 billion, will further solidify its place among the “ABCDs” of global commodity trading together with ADM, Cargill, and Louis Dreyfus.
Viterra, with $54 billion in annual revenue, will contribute its expertise and trading capabilities to the newly formed entity. This merger aims to capitalize on market demand, crop shortages, and the increasing volatility of food commodities worldwide.