Bunge, Viterra to merge to form $34 billion agribusiness powerhouse

CHICAGO, June 13 (Reuters) – U.S. grain trader Bunge ( BG.N ) and Glencore ( GLEN.L )-backed Viterra are merging to create an agricultural trading giant worth about $34 billion including debt, the companies said on Tuesday, in a agreement that is likely to attract closer regulatory scrutiny.

The deal brings the combined company closer on a global scale to leading rivals Archer-Daniels-Midland ( ADM.N ) and Cargill ( CARG.UL ), which value Bunge and Viterra at about $1[ads1]7 billion each. However, Bunge shareholders will own about 70% of the combined company, because Bunge will pay for 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 about 65.6 million shares of Bunge stock, valued at about $6.2 billion, and about $2 billion in cash.

Bunge will also assume $9.8 billion of Viterra’s debt, according to a joint statement.

Bunge is already the world’s largest oilseed processor, and analysts said it and Viterra’s crushing operations could face regulatory scrutiny in Canada and Argentina.

Last year, Bunge was the biggest exporter of corn and soybeans from Brazil, the world’s leading source of staple crops for making animal feed and biofuel, according to data from shipping agent Cargonave. Viterra was the third largest corn exporter and the No. 7 soybean shipper.

Together, the companies accounted for about 23.7% of Brazil’s corn exports in 2022 and 20.9% of Brazil’s soybean exports, Cargonave data showed.

In the US, Viterra expanded its business of buying and selling grain through the purchase of Gavilon last year. The merger will strengthen Bunge’s grain exporting and oilseed processing businesses in the world’s No. 2 corn and soybean exporter, where it has a smaller presence than ADM and Cargill.

The agreement also expands Bunge’s physical storage and handling capacity for grain in the major wheat exporter in Australia, where the company currently only operates two grain elevators and one port terminal in the western part of the country. Viterra has 55 storage 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 role in 2019 when the company itself was a takeover target, will oversee the combined entity.

Heckman oversaw a portfolio review that saw Bunge scale back or sell underperforming businesses such as South American sugar and Mexican wheat milling, and invest in its core edible oils business. The company reported record earnings last year after a string of quarterly losses in 2018. Heckman previously led Gavilon from 2008 to 2015.

The Consumer Federation of America said the deal would reduce competition for farmers’ crops and consolidate the processing of oilseeds used to make plant-based foods as well as biofuels.

“Further concentration seems likely to harm consumers and businesses, such as plant-based food producers, that rely on these commodities,” said Thomas Gremillion, director of food policy for the federation.

Bunge said it plans to buy back $2 billion of the stock to boost the accretion from the deal to adjusted earnings. The deal is backed by a $7 billion financing commitment from Sumitomo Mitsui Banking Corporation (SMBC).

Viterra’s shareholders will own 30% of the combined company after the deal is expected to close in mid-2024, and about 33% after completion of the buyback plan.

The world’s biggest vegetable oil producer Bunge had also partnered with oil major Chevron ( CVX.N ) and seeds and chemicals giant Bayer ( BAYGn.DE ) to pursue rising demand for renewable fuel feedstocks.

In Ukraine, the world’s top sunflower producer and largest supplier of sunflower oil, a combined Bunge-Viterra will have three oilseed processing plants across the country’s south and east – in Kharkiv, Dnipro and Mykolaiv.

Buying Viterra would bring Bunge’s revenue, which was $67.2 billion in 2022, more in line with ADM, which posted sales of nearly $102 billion last year.

In early 2017, Viterra, then known as Glencore Agriculture, attempted to take over Bunge, which was then valued at $11 billion. The attempt was rejected.

The merger is expected to generate approximately $250 million in pre-tax annual gross operating synergies within three years.

Reporting by Karl Plume and Tom Polansek in Chicago, Anirban Sen in New York, and Arunima Kumar and Mrinalika Roy in Bengaluru Editing by Caroline Stauffer, Matthew Lewis, Devika Syamnath, Kirsten Donovan

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