U.S. grains merchant Bunge and Glencore Plc-backed Viterra are merging to create a roughly $34 billion agricultural trading powerhouse that will better compete with industry leaders Cargill Inc and Archer-Daniels-Midland Co. The deal will likely draw close regulatory scrutiny in countries including Canada and Australia, where the companies have overlapping businesses. It may require the consent of Glencore, which bought Viterra for $6.2 billion in 2012.
The combined company will be led by current Bunge chief executive Greg Heckman, with Bunge chief financial officer John Neppl serving as co-chief operating officer. The new company’s board will include eight Bunge directors and four nominated by Viterra shareholders after the deal closes. The companies expect the merger to be completed in the middle of next year.
Combining the two companies will help the combined entity to connect the world’s largest producers of crop production to areas with growing consumer demand, the companies said. The company will also have a strong presence in oilseed processing and will be one of the world’s top three wheat traders, with access to critical ports on the United States Pacific coast.
Bunge, with a market value of $14 billion, has benefited from soaring crop prices and increased demand for protein-rich foods such as meat and dairy. Bunge’s earnings last year were up from the previous year. Viterra, a Rotterdam-based commodities firm owned by Swiss mining and commodity giant Glencore, has also been profitable.
Viterra is a top-five global trader sourcing oilseeds such as rapeseed, sunflower, wheat, corn, and other grains. The company operates in Brazil, Australia, Russia, and North America and has a storage and processing assets network.
A combination of the two companies will put the combined entity among the top tier of global grain merchants, with a focus on soybeans and wheat, and an advantage in shipping to food-importing Latin America, the companies said. It will have a presence in key ports across the globe, as well as a broad network of trading offices.
The companies said the acquisition would be funded with stock and cash. The transaction will be subject to both company shareholders’ approval and the satisfaction of certain customary closing conditions. The company said the companies expect to generate cost synergies of about $1 billion annually. Viterra shares rose 2.5% to $91.45 in premarket trading on Tuesday. Bunge fell 1.9% before the opening bell. The company’s shares were trading below their 52-week low of $84.97 in September. The stock has lost more than 40% of its value since then, as investors have worried that rising interest rates could hurt the company’s profit margins. The decline has weighed on the overall market, pushing Monday’s S&P 500 index down 1%. The index is on track to post its worst monthly performance in over a decade. —Reuters’ Christopher Fox contributed to this report.
