An agreement to create an agricultural trading giant worth more than $30 billion could be signed as early as this weekend.
U.S. grains merchant Bunge is putting the final touches on a deal to merge with Glencore-backed peer Viterra, reported Reuters citing sources.
Bunge's management team would oversee the combined company, the sources added. Bunge will pay for most of the deal with stock but will also use cash and has lined up debt financing from banks, the sources said.
While the deal is on track to be announced next week, there is always a possibility it may collapse at the last minute, the sources cautioned. As noted by Bloomberg, previously the structure of Glencore already considered the possibility of a deal with Bunge, but in 2017 was rejected.
It was reported on May 25 that Bunge and Viterra were in talks to combine, without providing details on the deal's terms and timing.
According to market operators, the two companies united would also create a dominant exporter in Brazil and a market-leading soybean crusher in Argentina. Bunge was Brazil's largest corn and soybean exporter in 2022, while Viterra was the third largest corn exporter and seventh largest soybean supplier. Combined, the companies accounted for about 23.7% of Brazil corn exports in 2022 and 20.9% of Brazil soybean exports, Cargonave data showed.
Experts believe that the Brazilian antitrust agency CADE would focus on a potential merger's effects on the domestic market and would not block the merger because there are other competitors on the market.
Mikhail Shikhmuradov, an expert of the International BRICS Competition Law and Policy Centre, noted:
"Mergers and acquisitions in agribusiness are common and can increase efficiency, innovation, and geographic expansion of companies. On the other hand, they also lead to increased market concentration, reduced biodiversity, worsened working conditions and employee wages, as well as higher prices for consumers and a drop in farmers' incomes.”
The Viterra-Bunge deal could attract regulatory attention, especially in countries where both companies operate, such as Argentina and Canada. Mikhail Shikhmuradov listed measures that authorities and stakeholders can take to prevent negative consequences of the deal:
- Conduct a thorough analysis of the possible impact of the deal on competition, the environment and food security;
- Ensure transparency and accountability of companies on ESG issues, as well as encourage investment in research and development in the field of agro-technology;
- Support the development of small and medium-sized enterprises in the agribusiness sector, including to increase their market power.
