Bunge, Viterra Merge Creating Global Powerhouse

Through a deal with an overall value of approximately $18 billion, Bunge, one of the original A-B-C-D giants of grain trading, has agreed to a merger with Glencore, CPP Investments, and BCI-backed Viterra, creating a global powerhouse.

Glencore acquired Viterra in 2012 for CAD6.1 billion through a deal that valued Viterra at approximately CAD6.1 billion at the time. Over the years, Viterra has been maneuvering to gain a greater stake and higher position in global commodities.

Bunge is currently the world’s largest oilseed processor, and last year, was the top soybean and corn exporter in Brazil, while Viterra was the third-largest exporter of corn and seventh largest exporter of soybeans. Together, the combined business resulting from this merger creates an entity that rivals Cargill or ADM on the global stage, and values each partner in the deal at approximately $17 billion.

Under the terms of the deal, which has already secured unanimous approval from the Board of Directors of both Bunge and Viterra: ~ Viterra shareholders will receive 65.6 million Bunge shares valued at about $6.2 billion, along with approximately $2 billion in cash.

~ Bunge will assume $9.8 billion in Viterra debt, which is associated with about $9 billion of highly liquid Readily Marketable Inventories.

~ Bunge will also repurchase $2 billion of its own stock as soon as practicably possible, and no later than 18 months post-close.

~ Once closed, Viterra will own 30 percent of the combined company on a fully diluted basis, and about 33 percent after completion of the repurchase plan.

~ Operational headquarters will be located in St. Louis, Missouri, and Viterra’s current headquarters in Rotterdam will remain an important commercial location in the future of the combined company.

~ The Bunge Board of Directors is expected to be composed of eight Bunge nominees, and four representatives nominated by Viterra shareholders after the close of the transaction. ~ Glencore and CPP Investments will each enter into a shareholder agreement with Bugne at the close of the merger, and will each be given the ability to nominate two Bunge board members.

It has also been separately announced that Glencore would exit Viterra, and will receive $3.1 billion in Bunge stock and another $1 billion in cash for its 50 percent stake in the agribusiness.

“The merger of Viterra with Bunge is expected to realize significant value for Glencore,” said Gary Nagle, CEO, Glencore. “Our investment in the agriculture sector dates back over 40 years and has grown from being a small grains trader to being part of a world leading, fully integrated global agriculture network.”

Nagle continued, “The combined group would be a premier pure-play agribusiness solutions company, well placed to meet increased global demand as well as the ongoing challenge of providing sustainable, traceable food and feed products to customers around the world. This would be underpinned by a rigorous focus on creating value for all stakeholders.”

Moving forward, the combined entity will operate as Bunge, and Greg Heckman, current CEO of Bunge, will continue at the helm, while John Neppl, chief financial officer, Bunge, will also retain his role. Meanwhile, David Mattiske, CEO, Viterra, will assume the role of co-chief operating officer.

Heckman explained that the merger will significantly accelerate Bunge’s strategy, building upon its fundamental foundation of connecting farmers to consumers delivering essential food, feed, and fuel to the world.

“Our highly complementary asset footprints will create a network that connects the world’s largest production regions to areas of fastest growing consumption, enhancing the geographical balance and adaptability of our global value chains and benefiting farmers and end-customers,” said Heckman.

Mattiske agreed, stating, “Viterra and Bunge are two leading agriculture businesses. In combining our highly complementary origination, processing and distribution networks, we are better positioned to meet the increasing demand for the food, feed and fuel products we offer.” “Together, we will play a leading role in the future of the agriculture industry, developing fully traceable, sustainable supply chains and moving towards carbon-neutral operations, while creating a strong growth platform for our combined business.”

A key point made by the companies is that this deal will give both an enhanced ability to meet the demands of increasingly complex markets; giving both greater access to key origination markets. The resulting diversified agricultural network covering all major crops will enable the company to provide solutions to end-customers, while its complementary value chains and origination capabilities will give farmers greater market access and differentiated, value-added solutions.

Together, the companies will have greater capacity to invest in global initiatives, and its enhanced network will foster efficiencies and ability to invest in its teams and technology such as training, development, advancement of low CI products, digitization of activities, and other sustainable solutions.

Within three years of completion, the deal is expected to generate approximately $250 million of annual gross pre-tax operational synergies, along with incremental network synergies, vertical integration efficiencies, improved logistics, and trading optionality from a larger, more diversified footprint.

Likewise, improved risk and credit profiles are expected to drive capital structure efficiencies and benefits to cost of capital.

“We have great respect for the team at Viterra, which shares our commitment to excellence, and believe this combination will offer great opportunities for employees of both companies,” said Heckman. “Together, we will be positioned to increase our operational efficiency while innovating to address the pressing needs of food security, efficiency for end-customers, market access for farmers, and sustainable food, feed and renewable fuel production.”

“We look forward to joining with the Bunge team as we enter this next chapter, creating new opportunities for our people,” added Mattiske. “The combined talent and experience of our workforce will allow us to offer a truly world-leading service across everything we do.”

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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