Bunge to buy Glencore-backed Viterra in $8.2 billion agribusiness deal

Global crops trader Bunge is set to buy rival Viterra in a $8.2 billion cash-and-shares deal, building an agri giant to rival the biggest trading houses in moving grains, oilseeds and pulses from farm to consumer. doing.

The combined group will compete with industry leaders Cargill and Archer Daniels Midland, strengthening Bunge’s presence in some of the world’s key food supply regions such as Canada and the US.

Shareholders of Glencore-backed Vitera will receive approximately $6.2 billion in Bungee shares and $2 billion in cash, and will control about one-third of the company’s stock after the transaction.

The consolidation comes after a year of bumper profits for Bunge and Viterra, as the war in Ukraine caused severe volatility in the grain and other commodities markets.

Bunge, which was 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. The others are ADM and Cargill, both headquartered in the US, and Louis Dreyfus, based in Europe.

Bunge Chief Executive Officer Greg Heckman said the merger would help diversify the company and help protect it from changes in the external environment — such as regional droughts caused by climate change.

“Putting these two networks together, we have diversification across geographies and across crops,” he said in an interview. “The asset footprints are very complementary.”

Vitera has its roots in grain-handling cooperatives in the Canadian province of Saskatchewan and has extensive operations across the US, which it gained through the acquisition of Gavilon in 2022.

Bunge will gain more than 270 storage and handling facilities, more than 30 processing sites and a fleet of more than 200 vessels, while strengthening its presence in fertile regions of Canada, the US, Brazil, Argentina and Australia.

Bunge-Viterra’s combined revenues were expected to total $121bn in 2022, which would put the merged group in the same league as Cargill, the world’s largest agricultural commodities company, with revenues of $165bn for the fiscal year ending May 2022. is with

Heckman declined to say whether regulators might require any asset disposals as part of the antitrust review. “We look forward to engaging on the regulatory front,” he said.

For Vitera’s shareholders – Glencore, the Canada Pension Plan Investment Board, and British Columbia Investment Management Corp – the deal represents an opportunity to cash in at a time when commodity trading houses are enjoying huge profits.

Shares in Swiss mining and trading giant Glencore climbed 5.3 per cent in London on the news. Shares of Bungee rose 1.9 per cent in New York.

Bunge will assume Viterra’s $9.8 billion in debt, which is tied to approximately $9 billion in readily available inventories. The transaction will be funded by a $7bn financing commitment provided by Sumitomo Mitsui Banking Corporation.

“We believe the ratings are on the upside for this deal, as it strengthens the position of both companies,” said Chris Johnson, portfolio analyst at debt ratings agency S&P Global.

The deal marks the end of Glencore’s agri business arm, formerly known as Glencore Agriculture. Glencore bought Vitera a decade ago for $6.1 billion. In 2016, Glencore sold its stake in Vitera to just under 50 percent, with the remainder held by the CPPIB and the British Columbia Investment Management Corporation.

The sale will boost Glencore’s financial firepower as it pursues the acquisition of Canadian steelmaking coal, copper and zinc producer Tech Resources.

Glencore previously held discussions with Bunge about a possible Vitera merger in 2017, but was turned down.

The companies said the deal would result in annual pre-tax cost savings of approximately $250 million within three years after completion, which is expected in mid-2024.