Global crop retailer Bunge is buying competitor Viterra in an $8.2 billion cash and stock deal, creating an agricultural behemoth that rivals the biggest trading houses moving grains, oilseeds and legumes from the farm to the consumer.
The combined group will compete with industry leaders Cargill and Archer Daniels Midland, strengthening Bunge’s presence in some of the world’s most important food-producing regions, such as Canada and the US.
Shareholders of Glencore-backed Viterra will receive approximately $6.2 billion in Bunge stock and $2 billion in cash, and will own one-third of the company’s stock following the transaction.
The consolidation comes after a year of huge profits for Bunge and Viterra as the war in Ukraine led to severe volatility in grain and other commodity markets.
Founded more than 200 years ago, Bunge has long been known as the “B” in the so-called ABCD of global grain trading companies that pair farmers with food importers. The others are ADM and Cargill, both headquartered in the US, and Louis Dreyfus, based in Europe.
Bunge CEO Greg Heckman said the merger would help diversify the company and protect it from changes in the external environment, such as regional droughts due to climate change.
“By merging these two networks, we have more diversification in geographies and diversification in crops,” he said in an interview. “The asset footprints are highly complementary.”
Viterra has its roots in grain processing cooperatives in the Canadian province of Saskatchewan and extensive operations in the US, which it acquired through the acquisition of Gavilon in 2022.
Bunge will have 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 sales were $121 billion in 2022, which would place the merged group in the same league as Cargill, the world’s largest agricultural commodities company with sales of $165 billion in its fiscal year ending May 2022.
Heckman declined to say whether regulators could require asset sales as part of antitrust investigations. “We look forward to getting started on the regulatory front,” he said.
For Viterra shareholders – Glencore, Canada Pension Plan Investment Board and British Columbia Investment Management Corp – the deal presents a money-making opportunity at a time when commodity trading houses are making big profits.
Shares in Glencore, the Swiss mining and trading giant, rose 5.3 percent in London on the news. Bunge shares rose 1.9 percent in New York.
Bunge assumes Viterra’s $9.8 billion debt, which is tied to about $9 billion in easily traded inventories. The transaction is funded by a $7 billion financing commitment provided by Sumitomo Mitsui Banking Corporation.
“We believe there is an upside to this transaction as it strengthens the positions of the two companies,” said Chris Johnson, a portfolio analyst with debt rating agency S&P Global.
The deal ends Glencore’s agricultural business, formerly known as Glencore Agriculture. Glencore bought Viterra ten years ago for $6.1 billion. In 2016, Glencore sold its stake in Viterra to just under 50 percent, with the remainder held by CPPIB and British Columbia Investment Management Corp.
The sale will bolster Glencore’s financial strength as it pursues an acquisition of Canadian coal, copper and zinc steel producer Teck Resources.
Glencore had previously held talks with Bunge about a possible Viterra merger in 2017, but were turned down.
The companies said the deal would generate about $250 million annually in pre-tax cost savings within three years of completion, expected by mid-2024.