Global agribusiness giants Bunge (NYSE: BG) and Viterra have announced they will join forces in a US$34 billion (A$50 billion) merger to create one of the world’s largest agricultural companies.
The combined entity will retain the Bunge name and be headquartered in the US state of Missouri.
It is expected to generate US$206 billion in annual revenues and roughly US$4.42 billion in net income.
Bunge said it would be well positioned to meet the demands of increasingly complex markets.
It will be able to better serve farmers and end customers by showcasing greater operational flexibility across oilseed and grain supply chains and processing and having more diversified capabilities and employee talent.
Industry experts have speculated the new entity will compete with CBH Group for the title of Australia’s biggest grain exporter.
The merger is expected to be completed by mid-2024.
Highly-concentrated grain market
Bunge and Viterra operate in the world’s highly-concentrated grain market.
In Australia, Bunge owns an export terminal at the Port of Bunbury and two grain receival sites in Western Australia, while its local head office is based in Melbourne.
Viterra has 55 grain storage sites across South Australia and western Victoria, and six terminals at Port Adelaide’s Outer Harbour and Inner Harbour, Port Giles, Thevanard, Port Lincoln and Wallaroo locations.
In 2012, Swiss commodities house Glencore (LSE: GLEN) bought a 49.99% stake in Viterra, while the remaining equity is owned by Canada Pension Plan Investment Board and British Columbia Investment Management Corporation.
Viterra’s current headquarters in Rotterdam have been earmarked as a future commercial location for Bunge.
Terms of the deal
Under the terms of the merger, Viterra shareholders will receive 65.6 million shares in Bunge with an aggregate value of approximately US$6.2 billion.
They will also receive approximately US$2 billion in cash, representing a consideration mix of 75% Bunge stock and 25% cash.
As part of the transaction, Bunge will assume US$9.8 billion of Viterra debt, which is associated with approximately US$9 billion of highly-liquid, readily-marketable inventories.
In addition, Bunge said it would immediately commence re-purchasing US$2 billion of its own stock to enhance accretion to adjusted earnings per share.
On completion of the merger, Viterra shareholders will own 30% of the new entity on a fully-diluted basis and approximately 33% after completion of the re-purchase plan.
Connecting farmers to consumers
Bunge chief executive officer Greg Heckman said the merger with Viterra would accelerate a strategy of connecting farmers to consumers by delivering essential food, feed and fuel to market.
“Our complementary asset footprints will create a network that connects the world’s largest production regions to areas of fast-growing consumption, enhancing the geographical balance and adaptability of our global value chains and benefitting farmers and customers,” he said.
“We have great respect for the team at Viterra as they share our commitment to excellence, and we believe that together, we will be able to increase our operational efficiency while innovating to address the pressing needs of food security, efficiency for customers, market access for farmers and sustainable food, feed and renewable fuel production.”
Global agricultural giant
Viterra chief executive officer David Mattiske said the merger would create a global agricultural giant.
“Together, we will play a leading role in the future of the world’s agriculture industry, developing fully-traceable and sustainable supply chains and moving towards carbon-neutral operations, while creating a strong growth platform for our combined business,” he said.
“We will create value for stakeholders across our network as we build on our shared purpose to connect producers and consumers around the world [and] we look forward to joining with the Bunge team as we enter this next chapter… to offer a truly world-leading service across everything we do.”