Bunge has labored arduous to get its stability sheet in form. Underneath Greg Heckman, who took over as chief government in 2019, the US grains dealer has reduce debt, shed underperforming property and improved earnings and returns.
Now it is able to flaunt its seaside physique. It’s buying rival Viterra for $18bn, together with debt. The money and shares deal will rework it into one of many world’s greatest agricultural commodities buying and selling homes. The mixed revenues of the pair, which totalled $140bn in 2022, would put it in the identical league as business leaders Cargill and Archer Daniels Midland.
The strategic logic of shopping for Viterra is difficult to fault. Property are complementary. Bunge is the world’s greatest oilseed processor. Viterra is a giant grain purchaser and exporter. Becoming a member of forces brings vertical integration and loads of price financial savings. Each teams are benefiting from the increase in renewable diesel and conflict-induced jumps in costs for oilseeds and grains.
Bunge’s considered provide values Viterra at 8.6 instances enterprise worth to ebitda. That compares with 6 instances for Bunge itself however decrease than ADM’s a number of of 10 instances.
A 140 per cent share worth rise over three years has given Bunge a useful takeover foreign money. Viterra’s house owners — Glencore, Canada Pension Plan Funding Board (CPPIB) and British Columbia Funding Administration — will obtain about 65.6mn shares of Bunge inventory, valued at roughly $6.2bn and about $2bn in money. The latter can be lined by the $250mn in price financial savings forecast three years post-closing.
Bunge’s monetary self-discipline means it ought to be capable to assume Viterra’s $9.8bn debt with little pressure. The debt to ebitda ratio is anticipated to remain beneath 2 instances. S&P has raised its score on Bunge.
Regulators could but cease Bunge from exhibiting off a ripped new physique. Would possibly this deal cut back competitors to purchase farmers’ crops? Anticipate antitrust scrutiny from governments within the US, Brazil, Argentina and even China. Bunge could but find yourself having to place its shirt again on.
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