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Commodities trader Glencore PLC’s announcement on Tuesday that it is selling its Canadian agriculture division, which includes Viterra Ltd., to U.S. rival Bunge Ltd. BG-N for US$8.2-billion will lead to a more powerful global agriculture giant in an already consolidated agribusiness sector.

Viterra is an international grain trader, which operates grain elevators, processing plants, port terminals and special crop facilities, while St. Louis-based Bunge focuses on processing oilseeds, including canola and soy. Bunge says the proposed merger will allow it to tap into more geographies of interest as well as diversify crop offerings. Combined, the two companies generated US$140-billion in revenue in fiscal year 2022.

The new Bunge-Viterra is also poised to become one of the strongest competitors in the global agribusiness made up of the ABCD giants: Archer-Daniels-Midland Co.; Bunge; Cargill Inc.; and Louis Dreyfus Corp. Co. It will become a strong rival of Archer-Daniels-Midland, which earned US$101.8-billion in revenue in the 2022 fiscal year, and move closer to Cargill, which reported revenue of US$165-billion.

Since it was acquired by Glencore’s GLNCY agricultural division in 2012, Viterra has developed a strong presence in the U.S., Canada, Europe, Australia and Argentina. It currently owns more than 270 storage facilities; 15 crushing and seven biodiesel plants; 29 port terminals; eight grain mills; and two sugar mills. It markets 134 million metric tons of commodities yearly and its crushing capacity is approximately 18 million metric tons a year.

After the merger with Bunge, which operates heavily in South America, the company will run 125 crushing and refining facilities; 55 port terminals; and more than 350 storage facilities. It will add 57 million metric tons in crushing capacity and 96 million metric tons in commodities marketed.

Based on 2022 fiscal results, the consolidated company is forecasting US$5.3-billion in adjusted earnings before interest, taxes, depreciation and amortization, or US$5.6-billion after cost savings from synergies, and US$2.9-billion in adjusted net income, or US$3.1-billion with synergies.

Viterra will help Bunge diversify its production of soy and corn by adding wheat, barley and rapeseed, while gaining a larger presence in Canada, Argentina and Australia.

Viterra, based in the Netherlands, operates 80 facilities in Canada as well as port terminals in Vancouver, Prince Rupert, B.C., Thunder Bay and Montreal. Bunge currently operates 12 facilities in Canada.

Bunge will also take on US$9.8-billion of debt from Viterra. In 2022, Standard & Poor’s revised Viterra’s credit rating to BBB-, despite it having reported higher-than-expected profitability. The rating was mainly explained by “high volatility of market prices in soft commodities” as well as Viterra’s acquisition of Gavilon Agriculture Investment, Inc. in 2022 for US$1.1-billion.

Bunge chief executive Greg Heckman will head the merged company, while Bunge chief financial officer John Neppl will remain in the role and Viterra CEO David Mattiske will become co-chief operating officer.

The combination of two major players will reduce competition in the consolidated agribusiness sector, leaving farmers waiting to see whether costs will rise as a result. Bunge said Tuesday the deal will give farmers enhanced access to global markets and more efficient supply chains.

With the invasion of Ukraine putting pressure on global supplies of grains, Canadian farmers are expected to produce the most wheat since 2001, according to a government report published in April.

In an analyst call Tuesday, Mr. Heckman said one of the drivers of the merger lies in bringing the two companies’ teams together, while Mr. Neppl said there are no plans for significant staff cuts.

Shares of Bunge rose 2.5 per cent to close at US$96.17 on the New York Stock Exchange on Tuesday.

Editor’s note: The location of Viterra's headquarters has been corrected in the online version of this story.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 20/02/24 3:59pm EST.

SymbolName% changeLast
Bunge Ltd
Glencore International Plc ADR

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