U.S. grains trader Bunge Ltd. is finalizing a merger agreement with rival Viterra, which is financed by Glencore Plc. The combined company would be valued at more than $30 billion, including debt, in agricultural trading.
The agreement, whose terms have not yet been disclosed, would take place while Russia’s war in Ukraine has put the supply security of the world food markets to the test. Antitrust authorities would carefully assess its potential effects.
According to the sources, Bunge, which has a market value of over $14 billion and has debt netting out at approximately $2.7 billion will pay for the majority of the transaction with stock but will also use cash and has secured debt financing from banks. According to the sources, Greg Heckman, the chief executive of Bunge, would lead the management team in charge of the combined business.
If the negotiations are successful, the sources added, the privately held Viterra’s shareholders, which in addition to Glencore include the Canada Pension Plan Investment Board and British Columbia Investment Management Corp, may approve the purchase as soon as this weekend.
Although the transaction is on track to be revealed next week, the sources cautioned that there is always a chance that it might fall through at the last minute because the situation is private. Depending on how Bunge’s stock performs by the time the contract is signed; the deal’s final worth may change.
Viterra and Glencore chose not to comment. Requests for comment from Bunge did not immediately receive a response.
On May 25, Bloomberg News reported that Bunge and Viterra were in talks to merge, but it didn’t go into specifics about the terms or timetable of the agreement.
Bunge and three other major participants, Archer-Daniels-Midland Co, Cargill Inc., and Louis Dreyfus Co., already control the majority of the trade in staples including wheat, corn, and soybeans. They are collectively known as “ABCD,” and they have been making large profits since the Ukraine War delayed shipments and skyrocketed grain prices.
According to information from the shipping bureau Cargonave, Bunge was listed as Brazil’s top exporter of maize and soy last year, the two main crops used to make animal feed and biofuels. Third-largest exporter of corn and the seventh-largest shipper of soybeans was Viterra.
By acquiring Viterra, Bunge would be able to match its projected 2022 revenue of $67.2 billion with that of Archer-Daniels-Midland, which had sales of around $102 billion in 2017. Bunge’s grain exporting and oilseed processing businesses would benefit as well from the acquisition.
This transaction has been attempted already. Early in 2017, Viterra—then known as Glencore Agriculture—attempted to acquire Bunge, which had an $11 billion market value at the time. Bunge turned down Glencore in May 2017 after the latter made an exploratory approach to discuss “a possible consensual business combination.”
Viterra acquired Gavilon for $1.1 billion last year, expanding its grain purchasing and selling operations in the US.
