Global crops trader Bunge is to buy rival Viterra for $8.2 billion in cash and stock, creating an agricultural giant that will compete with the biggest trading houses that transport grains, oilseeds and pulses from farm to consumer.
The combined group will compete with industry leaders Cargill and Archer Daniels Midland, strengthening Bunge’s presence in some of the world’s major food-supplying regions, such as Canada and the US.
Shareholders in GlencoreViterra, backed by the company, will receive about $6.2 billion in Bunge stock and $2 billion in cash and will control one-third of the company’s stock after the deal.
The consolidation comes after a year of big gains for Bunge and Viterra as the war in Ukraine led to severe volatility in grain and other commodity markets.
Bunge, founded more than 200 years ago, has long been known as the “B” in the so-called ABCD of global grain trading companies that connect farmers with food importers. Others are ADM and Cargill, both based in the US, and Louis Dreyfus based in Europe.
Bunge CEO Greg Heckman said the merger would help diversify the company and insulate it from changes in the external environment — such as regional droughts caused by climate change.
“By bringing these two networks together, we have more diversification in geographies and diversification in crops,” he said in an interview. “The asset footprints are very complementary.
Viterra has its roots in grain processing cooperatives in the Canadian province of Saskatchewan and extensive operations across the US, acquired through the 2022 acquisition of Gavilon.
Bunge will acquire more than 270 storage and handling facilities, more than 30 processing sites and a fleet of more than 200 vessels, strengthening its presence in the fertile regions of Canada, the US, Brazil, Argentina and Australia.
Bunge-Viterra’s combined revenue totaled $121 billion in 2022, which would put the combined group in the same league as Cargill, the world’s largest agricultural commodities company, with revenue of $165 billion in its fiscal year ending May 2022.
Heckman declined to say whether regulators might require any asset sales as part of antitrust probes. “We look forward to joining the regulatory front,” he said.
For Viterra’s shareholders – Glencore, the Canada Pension Plan Investment Board and British Columbia Investment Management Corp – the deal represents a chance to cash in at a time when commodity trading houses are enjoying big profits.
Shares in Glencore, the Swiss mining and trading giant, rose 5.3 percent after the report in London. Bunge shares rose 2.5 percent in New York.
Bunge will assume Viterra’s $9.8 billion in debt, which is tied to about $9 billion in readily marketable inventory. The transaction will be financed by a US$7 billion financial commitment provided by Sumitomo Mitsui Banking Corporation.
“We believe this transaction has a positive rating as it strengthens the positions of both companies,” said Chris Johnson, portfolio analyst at S&P Global.
The deal marks the end of Glencore’s agricultural business, formerly known as Glencore Agriculture. Glencore bought Viterra for $6.1 billion ten years ago. In 2016, Glencore sold its stake in Viterra to just under 50 percent, with CPPIB and British Columbia Investment Management Corp holding the rest.
The sale will boost Glencore’s financial firepower is seeking a takeover of Canadian steelmaking coal, copper and zinc producer Teck Resources.
Glencore had previously held talks with Bunge about a possible Viterra merger in 2017, but was he refused.
The companies said the deal will generate approximately $250 million in annual pre-tax cost savings within three years of completion, which is expected in mid-2024.