Potential Viterra merger with U.S. rival threatens Prairie head office jobs

The owners of Canada’s largest grain transport business, Viterra Ltd., plan to promise enhanced service for farmers and job security to win customer and government support for a potential merger with U.S. rival Bunge Ltd. BG-N

Switzerland-based commodities company Glencore PLC GLNCY is in talks to unite Viterra, its agricultural division, with Bunge to create a global business worth approximately US$25-billion. Bunge chief executive Gregory Heckman, based in St. Louis, is expected to run the combined companies.

Viterra, which traces its roots to the farmer-owned Saskatchewan Wheat Pool, has already begun marketing the merits of a potential deal to provincial politicians, according to sources at the company and in the Saskatchewan and Manitoba governments. One source said Viterra will pledge minimal layoffs and more efficient service if a merger takes place.

The Globe and Mail is not identifying these sources because they are not authorized to speak publicly on the transaction.

Viterra’s Canadian head office is in Regina and the company operates more than 80 facilities in Canada, including six grain-shipping terminals in the ports of Vancouver, Prince Rupert, Thunder Bay and Montreal. Viterra has two oilseed processing plants, in Manitoba and Quebec. Bunge, which focuses on processing oilseeds such as canola, soy and sunflowers, has 12 facilities in Alberta, Saskatchewan, Manitoba and Ontario.

Part of the logic of the merger is it joins Viterra, a business focused on grains such as wheat, corn and barley, with Bunge’s specialization in oilseeds, said a source affiliated with Viterra. The share price of New York Stock Exchange-listed Bunge rose by 3.8 per cent this week on news of a potential deal, which was first reported by Bloomberg.

Spokespersons for the Saskatchewan and Manitoba governments declined to comment on the merger Friday, because the two companies haven’t announced a transaction. An Alberta government spokesperson was unable to comment, because of rules on taking new policy positions during an election campaign. However, several government officials said Viterra and Bunge provide essential services to farmers and are considered critical players in the Prairie provinces’ economies, and any deal between the two would be heavily scrutinized.

Glencore and Bunge have held takeover talks in the past, aimed at creating a company with the scale to match North America’s two dominant agricultural companies: Minneapolis-based Cargill Inc. and Chicago’s Archer-Daniels-Midland Co.

In talks that took place in 2017, Glencore was offering to buy Bunge. Now the tables have turned, with Bunge shareholders expected to control the combined companies, and Glencore becoming a minority partner. Last year, Bunge earned a US$1.6-billion profit, while Viterra’s net income in 2022 was close to US$1-billion.

Bunge has a US$14-billion market capitalization and in a recent interview, Mr. Heckman said the company has the “firepower” to make a large acquisition.

Glencore acquired Viterra in 2012 for $6.1-billion. In 2016, it sold stakes in the business to two pension plans, the Canadian Pension Plan Investment Board (CPPIB) and British Columbia Investment Management Corporation (BCI), to raise money for paying down debt. CPPIB paid US$2.5-billion for its 40-per-cent stake in Viterra, while BCI owns 10 per cent and Glencore holds 49.9 per cent.

Two years ago, Glencore appointed a new CEO, Gary Nagle, who has focused on expanding the company’s mining businesses. Mr. Nagle has expressed frustration with the valuation investors attach to Viterra and said he would consider a transaction that would show the division’s true worth. Mr. Nagle has also talked about selling a portion of Viterra to investors through an initial public offering.

Earlier this year, Glencore pitched a merger with Teck Resources Ltd., Canada’s largest base metal mining company. To date, Vancouver-based Teck has rebuffed all overtures.