Bunge and Viterra Merger to Form $34 Billion Agricultural Trading Powerhouse

In a significant development in the agricultural sector, U.S. grain merchants Bunge and Glencore-backed Viterra have announced a merger, creating a combined entity valued at about $34 billion, including debt. This move positions the new company closer to industry leaders Archer-Daniels-Midland and Cargill in terms of global scale, with each of Bunge and Viterra valued at approximately $17 billion.

Under the terms of the deal, Bunge shareholders will hold about 70% of the combined company, as Bunge will finance a substantial portion of the transaction with cash. Additionally, Viterra shareholders are set to receive around 65.6 million shares of Bunge stock, valued at about $6.2 billion, along with approximately $2 billion in cash. Bunge will also assume $9.8 billion of Viterra’s debt.

The deal, expected to close in mid-2024, will result in Viterra shareholders owning a 30% stake in the new entity. Bunge CEO Greg Heckman noted the complementary nature of the two companies, citing strategic merits that have been considered for years.

This merger comes on the heels of Bunge posting record adjusted profits in 2022, benefiting from tight global grain supplies partly due to Russia’s war on Ukraine. Bunge shares experienced a more than 2% increase following the announcement.

However, the merger could face regulatory scrutiny, particularly regarding Bunge and Viterra’s oilseed processing businesses in Canada, Argentina, and other regions. Canada’s antitrust regulator is set to review the merger, and Argentina’s competition bureau awaits formal notification.

In 2022, Bunge was the top corn and soybean exporter from Brazil, the world’s leading source of these staple crops, while Viterra ranked as the third-largest corn exporter and seventh soybean shipper. The merger is expected to bolster Bunge’s grain exporting and oilseed processing operations in the United States, enhancing its position in a market where it currently trails ADM and Cargill.

The merger also expands Bunge’s physical grain storage and handling capacity in Australia, a major wheat exporter. Bunge CFO John Neppl has suggested that sustained annual earnings of $4 billion are a reasonable target post-merger.

Bunge’s management team, led by CEO Greg Heckman, will manage the combined entity. Heckman, who has been instrumental in Bunge’s recent strategic shifts, including scaling back or selling underperforming operations and focusing on core businesses, is credited with driving the company to record earnings last year.

However, the Consumer Federation of America expressed concerns that the deal might reduce competition in the agricultural sector, potentially impacting consumers and businesses reliant on these commodities.

Bunge plans to repurchase $2 billion of its stock to enhance the deal’s accretion to adjusted profit. The merger is supported by a $7 billion financing commitment from Sumitomo Mitsui Banking Corporation (SMBC). Key shareholders, including Canada Pension Plan Investment Board (CPPIB) and British Columbia Investment Management Corp, have agreed to support the deal, with CPPIB expected to own 12 percent of the combined company.

In Ukraine, a significant sunflower producer, the merged entity would control three oilseed processing plants, potentially impacting the supply of sunflower oil. The merger aims to align Bunge’s revenue more closely with that of ADM, its major competitor.

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