Brief: Bunge could join agricultural ‘big leagues’ via proposed merger with Viterra

• US-based agribusiness firm Bunge and Canadian grain handler Viterra plan to merge into a combined entity valued at $34 billion.
• Buying Viterra would enable Bunge to compete more closely with ag giants like ADM and Cargill.
• As the deal would create an agricultural giant, the companies will likely face regulatory scrutiny in certain countries including Argentina and Canada.
• The deal is expected to be finalized in 2024.

Why it matters:

While Bunge is a global leader in soybean processing, the deal with Viterra would boost its grain processing/exporting business and expand its grain storing and handling capacity around the world, according to an analysis by Reuters.

Viterra, backed by Swiss commodity trading company Glencore, has grain capacity in North and South America, Europe and Australia.

Consensus is that this merger will boost Bunge’s ability to compete with other top agribusiness companies including ADM, Cargill and Louis Dreyfus.

Those three companies along with Bunge are often called the “ABCD” agribusiness companies; collectively, then control about 90% of the global grain trade. Since the war in Ukraine’s disrupting of the grain-trading industry, which sent grain prices sky high, these companies have reported significant profits.

Jed Ellerbroek, senior research analyst at Argent Capital Management, told the St. Louis Post-Dispatch that, “Of the ABCD quartet, Bunge is by far the smallest. This is their way of trying to join the big leagues.”

Acquiring Viterra would boost Bunge’s revenues to be more on par with those other ABCD companies. Bunge posted revenues of $67.2 billion last year; ADM’s were more than $100 billion.

The big leagues will mean much regulatory scrutiny, however. Regulatory scrutiny, including antitrust scrutiny, is expected in Canada and Argentina, and likely other countries too.

The transaction is expected to be finalized in mid-2024.

Not too many years ago, Bunge itself was considered up for grabs when Glencore made an informal takeover approach to the company.