US agribusiness Bunge agreed to buy Glencore-backed Viterra for $8.2-billion in stock and cash, creating a trading giant capable of competing with the world’s biggest agricultural players.
Viterra shareholders will eventually own about 30% of the combined business after the transaction, the companies said in a joint statement. Roughly 75% of the payment would be made in Bunge stock, and another 25%, or $2 billion, in cash. The deal was unanimously approved by the boards of Bunge and Viterra.
Combining the two will create a trader big enough to take on the industry’s elite: Minneapolis-based Cargill and Chicago’s Archer-Daniels-Midland Co. The deal is the culmination of Bunge CEO Greg Heckman’s transformation of the once troubled St. Louis-based crop trader into a cash-rich oilseeds champion.
Bunge will assume $9.8-billion of Viterra debt. It also plans to repurchase $2 billion of its own stock. After the buyback, Viterra shareholders will own 33% of the merged company.
Glencore shares jumped as much as 4.1% in London. Bunge dropped about 3.2% in pre-market trading.
For most of its existence, Bunge was primarily a crop merchant. Its expansion to the Americas saw it become the B in the storied ABCD quartet of trading houses that dominated agricultural markets, which also includes Louis-Dreyfus.
After a wrong-way bet on soybean prices resulted in a surprise quarterly loss in 2018, Heckman took the helm at Bunge, cutting costs, selling under-performing businesses and focusing on risk management. The company has also benefited from the market turmoil and volatility caused by the war in Ukraine, while a boom in renewable diesel has helped underpin profits.
The merger will offer a way for Glencore CEO Gary Nagle to unlock value from the company’s 49.99% stake in Viterra, which has limited synergies with its wider metals, mining and trading operations.
Glencore has flirted with the idea of a deal with Bunge on and off for years. In 2017, it approached Bunge about a friendly takeover, but was publicly rebuffed.