According to sources familiar with the situation, Glencore Plc (GLEN.L)-backed Viterra and U.S. grains trader Bunge Ltd (BG.N) are finalizing a merger agreement to form a $30 billion agricultural trading giant.
Deal Details and Financing:
The terms of the agreement, which have not yet been made public, are anticipated to be stock-based, with Bunge bearing the bulk of the transaction's financial burden. To facilitate the merger, arrangements have also been made for cash and bank debt financing. The management team of Bunge, under the direction of Chief Executive Greg Heckman, is prepared to run the combined business.
Shareholders' Approval and Potential Implications:
Shareholders of held Viterra, including Glencore, the Canada Pension Plan Investment Board, and British Columbia Investment Management Corp, may give their approval to the deal as early as the upcoming weekend if negotiations proceed. The potential impact of the merger on global food markets, particularly considering the ongoing tensions related to Russia's actions in Ukraine, will likely undergo close scrutiny by antitrust regulators.
Market Landscape and Competition:
A few key players, including Archer-Daniels-Midland Co (ADM.N), Cargill Inc., and Louis Dreyfus Co., control the majority of the agricultural trade in staples like wheat, corn, and soybeans at the time of Bunge and Viterra's merger. This group, known as "ABCD," has profited from rising crop prices. It causes shipping delays as a result of the Ukraine conflict.
Potential Synergies and Business Expansion:
It is anticipated that Bunge's revenues will reach $67.2 billion after acquiring Viterra. It is equaling the $102 billion in sales that Archer-Daniels-Midland generated the previous year. The merger would strengthen Bunge's grain exporting and oilseed processing businesses, creating opportunities for future growth and expansion.
Historical Context and Previous Attempts:
It is not the first time that Bunge and Viterra have attempted to merge. Early in 2017, at a time when Bunge was valued at $11 billion, Viterra, then doing business as Glencore Agriculture, made a bid to acquire it. But Bunge declined Glencore's informal invitation to discuss a potential merger of companies at the time. Viterra recently expanded its presence in the US by strengthening its grain trading operations by paying $1.1 billion to acquire Gavilon.
Conclusion:
The Bunge and Viterra merger, supported by Glencore, is anticipated to create a potent force in the agricultural trading industry with a value estimated to exceed $30 billion. This merger must receive shareholder and regulatory approval. While giving the combined company opportunities for synergistic growth and greater market presence. It has the potential to change the market environment.
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