Bunge and Viterra announce merger

Bunge Limited has entered into a definitive merger agreement with Viterra Limited, a legal entity incorporated under the laws of Jersey, and certain affiliates of Glencore PLC, Canada Pension Plan Investment Board and British Columbia Investment Management Corporation. The agreement aims to create a global agribusiness company.

As communicated to the market, the merger will promote geographic and seasonal diversification; and expansion of risk management options, increasing companies’ resilience. The deal will also lead to greater operational flexibility in the oilseed and grain processing and supply chains, as well as combining employee resources and talents to create innovative solutions.

The agreement was approved by the boards of directors of Bunge and Viterra. As a result, Viterra shareholders are expected to receive approximately 65,6 million Bunge shares, worth approximately US$6,2 billion. And about $2,0 billion in cash. Bunge will also assume US$9,8 billion of Viterra's debt, which is associated with around US$9,0 billion of inventories.

As part of the transaction, Bunge plans to repurchase US$2,0 billion in Bunge's own shares to increase the value of adjusted earnings per share (EPS). The company intends to initiate repurchases as quickly as possible, subject to market conditions and SEC rules on trading restrictions, and expects to complete the repurchase plan within 18 months of the closing of the transaction.

Viterra shareholders will own 30% of the combined company at the closing of the transaction and approximately 33% upon completion of the repurchase plan. Greg Heckman, CEO of Bunge, highlighted that the merger significantly accelerates Bunge's strategy, enhancing the connection between farmers and consumers.

David Mattiske, CEO of Viterra, also supported the merger, believing that combining the two companies' sourcing, processing and distribution networks will position the combined company to meet growing demand for food products, animal nutrition ingredients and fuels.

Benefits of the merger

With the merger of Bunge Limited and Viterra Limited, the combined company positions itself as a global powerhouse in the agribusiness solutions sector. The merger increases grain and oilseed handling capacity, expands origination capabilities in significant regions and diversifies the company into key export origins and crushing destinations.

The greater extent of direct sourcing aims to promote sustainable practices in the global food supply. The company plans to implement transparency in origination, low-carbon product flows, full end-to-end traceability across key crops and origins, and accelerate regenerative agriculture to reduce greenhouse gas emissions.

Bringing the companies together creates a better balance of value chains across geographic regions and access to more key source markets, increasing the company's ability to provide solutions to end customers in any environment. Additionally, the merger will provide farmers with greater market access and differentiated, value-added solutions.

Together, Bunge and Viterra plan to invest in global initiatives to improve and connect value chains, providing more solution options for farmers and end consumers. Furthermore, the combined company aims to drive efficiency, connectivity and capabilities across value chains.

The companies estimate that the combination will generate approximately $250 million in annual pre-tax gross operating synergies within three years of closing.

The merger is financed with a US$7,0 billion financing commitment provided by Sumitomo Mitsui Banking Corporation. As communicated to the market, the companies expect the combined company's ratings at closing to remain strong as investment grade, with a pro forma adjusted leverage ratio for 2022 of 1,6x, after accounting for share repurchases of $2,0. .XNUMX billion.

Deadlines and approvals

The companies reported that they expect the operation to be completed in mid-2024. But everything is subject to compliance with the usual closing conditions, including the receipt of regulatory approvals and the approval of Bunge shareholders.

Why Jersey?

Jersey, an island in the English Channel, belongs to the British crown, but maintains political, legislative and fiscal autonomy. This autonomy derives from a complex history that dates back to the XNUMXth century, when the island remained loyal to the English monarch, even after the loss of the English provinces in Normandy.

Politically, the island of Jersey is administered by a Bailiwick, a figure who fulfills the role of head of state. The Bailiwick is appointed by the British Crown, but does not answer to the UK government. Jersey's parliament, called the "States Assembly", is made up of senators, deputies and connétables, the latter being leaders of the island's twelve municipalities. Despite not being part of the United Kingdom, the island has a special relationship with it, and one of the consequences of this is that Jersey's defense and international relations are the responsibility of the British government.

Jersey's autonomy also extends to the economy. The island has its own tax regime, which is considered attractive to high-income companies and individuals, which has led to the island being labeled a tax haven. This tax haven status, together with the island's political stability, has driven the development of a prosperous financial sector. Financial services make up the majority of Jersey's Gross Domestic Product (GDP).

Tourism, agriculture and fishing are also important to the island's economy, although on a smaller scale. Jersey agriculture is known especially for the Jersey cattle breed and potato cultivation. Tourism is driven by the island's natural beauty, beaches and rich cultural history.

Administratively, Jersey is divided into twelve municipalities, each led by a Connétable. Despite being small, the island has a well-developed infrastructure, with schools, hospitals and an efficient transport system.