In a move to accelerate their strategy of connecting farmers with consumers, US agribusiness Bunge and Canada’s Viterra have announced a merger valued at $6.2bn. The deal will see Bunge assume Viterra’s $9.8bn debt, with Viterra’s shareholders receiving 65.6 million Bunge shares worth over $6bn and $2bn in cash. The merger will create a new agriculture and food firm, benefiting from Viterra’s connecting capability and demand for plant-based oils and fats produced by Bunge.
The new global agribusiness will provide Bunge with the opportunity to expand its customer base and reach, helping to connect farmers to consumers worldwide. However, this merger is not the first for Bunge, as they have previously announced plans to merge with Swiss commodity trader Glencore worth $8.67bn in cash and shares. Meanwhile, in a separate joint venture with Glencore, Bunge is merging wheat, canola, barley, and sunflower operations in Canada, Australia, and Ukraine into G3 Global Grain Group, expected to close by July.
The overall increase in consolidation within the grain markets, specifically with grain handlers and logistics firms combining with major commodity traders, is creating many challenges. For example, overcapacity exists in some areas while there is a lack of export capacity elsewhere. However, the creation of these world-scale grain businesses will produce greater efficiencies and abilities to integrate entire supply chains. It remains to be seen whether these mega-mergers and consolidations will benefit farmers and consumers or just create additional market power in an increasingly complex sector.
Assuming that regulatory approval is granted, the deal is expected to close in mid-2024, subject to closing conditions and shareholders’ approval. Viterra shareholders are expected to own 30% of the combined company on a fully diluted basis by the closing date. The Canadian asset manager, British Columbia Investment Management Corporation will also back the merger and receive a minority stake in the newly combined entity and cash when the transaction is completed.
CEO of Bunge, Gregory Heckman, said the merger would “significantly accelerate Bunge’s strategy, building on our fundamental purpose to connect farmers to consumers to deliver essential food, feed, and fuel to the world”. He also added that the merger would create “fully traceable, sustainable supply chains”. Viterra had a successful year, reporting record earnings before interest, taxes, depreciation, and amortization of $2.65bn in 2022.
