US agribusiness Bunge Ltd. agreed to buy Glencore Plc-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 Tuesday in a joint statement. Roughly 75% of the payment would be made in Bunge stock, and another 25%, or $2 billion, in cash.
Combining the two will create a trader big enough to take on the industry’s elite: Minneapolis-based Cargill Inc. and Chicago’s Archer-Daniels-Midland Co. The deal is the culmination of Bunge Chief Executive Officer Greg Heckman’s transformation of the once troubled St. Louis-based crop trader into a cash-rich oilseeds champion.
Read more: Bunge-Viterra Deal Would Create $25 Billion Rival to Cargill
Glencore shares jumped as much as 4.1% in London. Bunge fell by about 3% in pre-market trading. Bloomberg News first reported the talks about a potential combination last month.
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 Co.
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. Since then, Bunge has replaced its new chief executive officer and other senior executives.
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.
The merger is expected to close in mid-2024, subject to regulatory approvals and approval by Bunge shareholders. The combined company will be led by Heckman and John Neppl, Bunge’s chief financial officer. Viterra CEO David Mattiske will join the Bunge leadership as co-chief operating officer.
The deal has the support of two of Canada’s biggest pension funds, which have a combined stake of 49.98% stake in Viterra, Bloomberg reported last month. The Canada Pension Plan Investment Board will receive an equity stake of about 12% in the combined company and about $800 million in cash, it said in a statement.
The transaction is fully funded with a financing commitment of $7 billion provided by Sumitomo Mitsui Banking Corporation.
(Updates with additional details in last two paragraphs.)