Bunge Limited’s BG pending merger with Viterra has been approved by the government of Canada. The approval, however, comes with terms and conditions to protect competition, encourage investment and secure economic benefits for Canada. This clears a major hurdle toward the creation of one of the world’s largest agribusiness companies worth $34 billion, including debt. Bunge expects it to close in early 2025.
The merger was announced in June 2023 and was unanimously approved by the boards of directors of both Bunge and Viterra. In October 2023, Bunge’s shareholders approved the merger. The shareholders had also approved the issuance of 65,611,831 common shares, par value of 1 cent per share of Bunge . They also voted in favor of changing the place of incorporation and residence of the ultimate parent company of the Bunge Group from Bermuda to Switzerland.
Bunge to Fulfill Certain Terms Set Forth by Canada
In April 2024, the Canadian Competition Bureau issued its non-binding advisory report to the Minister of Transport. It concluded that the Commissioner had no specific competition concerns for grain purchasing in Eastern Canada and most of Western Canada and for sales of the vast majority of downstream refined and specialty oil products.
It identified localized concerns relating to the purchase of canola in the Nipawin, SK and Altona, MB areas, as well as concerns related to canola oil sales to a small segment of customers in Eastern Canada. It also noted a potential concern regarding Bunge’s minority stake in G3 Canada.
The terms and conditions connected to the government of Canada’s approval will ensure that the acquisition will not have a negative impact on competition in Canada's grain and oilseed sector, notably for grain purchasing in Western Canada and the sale of canola oil in Central and Atlantic Canada.
Per the terms, Bunge will have to divest six grain elevators in Western Canada to maintain competitive options for farmers in the region. The company has to invest at least $520 million in Canada within the next five years. The approval also requires strict and legally binding controls on Bunge's minority stake in G3, another important grain company. This will ensure the company cannot influence G3's pricing or investment decisions.
A price protection program will have to be put in place for certain purchasers of canola oil in Central and Atlantic Canada to safeguard fair pricing and market stability. Also, Viterra's head office will have to be retained in Regina for at least five years to protect Canadian jobs.
BG-Viterra to Create a Premier Agribusiness Solutions Firm
The merged entity will boast an enhanced global network with a diversified agriculture network covering all major crops. The combination of both the companies’ highly complementary asset footprints and distribution network will connect the world’s largest production regions to areas of the fastest-growing demand. This will enhance the geographical balance and adaptability of the global value chains. A diversified global mix of earnings across processing, handling and merchandising and value-added products will lead to solid cash flow generation.
Along with increasing operational efficiency, the combination will further enhance Bunge’s innovation know-how. This will equip the company to address the pressing needs of food security, efficiency for end-customers, market access for farmers and sustainable food, feed and renewable fuel production. Additionally, the combination is expected to benefit from significant incremental network synergies across joint commercial excellence opportunities, vertical integration efficiencies and improved logistics optimization and trading optionality from a larger and broader network.
The merger is expected to lead to around $250 million of annual gross pre-tax operational synergies in the first three years. The transaction is expected to be accretive to Bunge’s adjusted earnings per share in the first full year post closing. It is expected to improve with the realization of synergies.
BG Stock’s Price Performance
Shares of Bunge have lost 14% over the past year against the industry's 1.7% growth.
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BG’s Zacks Rank & Stocks to Consider
Bunge currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation CRS, International Paper Company IP and Fortuna Mining Corp. FSM. CRS and IP sport a Zacks Rank #1 (Strong Buy) at present and FSM carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has an average trailing four-quarter earnings surprise of 14.1%. The Zacks Consensus Estimate for CRS’ fiscal 2025 earnings is pegged at $6.77 per share, indicating 42.8% year-over-year growth. Its shares have skyrocketed 198.5% in a year.
International Paper has an average trailing four-quarter earnings surprise of 28.8%. The Zacks Consensus Estimate for IP’s 2025 earnings is pegged at $3.02 per share, which indicates a 156% year-over-year upsurge. IP’s shares have gained 49% in a year.
Fortuna Mining has an average trailing four-quarter earnings surprise of 53.6%. The Zacks Consensus Estimate for FSM’s 2025 earnings is pegged at 56 cents per share, indicating a 17.7% year-over-year rise. FSM’s shares have gained 24% in the past year.
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