Bunge SA-Bunge & Viterra Merger Cleared by Canada Government, Set to Close Soon

Merger Approval and Terms - The merger between Bunge and Viterra was announced in June 2023 and unanimously approved by both boards of directors [1] - Bunge's shareholders approved the merger in October 2023, including the issuance of 65,611,831 common shares and the relocation of the parent company from Bermuda to Switzerland [1] - The Canadian government approved the merger with conditions to protect competition, encourage investment, and secure economic benefits for Canada [10] - The merged entity will be one of the world's largest agribusiness companies worth $34 billion, including debt, with the merger expected to close in early 2025 [10] Conditions and Divestitures - Bunge must divest six grain elevators in Western Canada to maintain competitive options for farmers [7] - The company is required to invest at least$ 520 million in Canada within the next five years [7] - Strict controls are imposed on Bunge's minority stake in G3 to prevent influence over G3's pricing or investment decisions [7] - A price protection program will be implemented for canola oil purchasers in Central and Atlantic Canada to ensure fair pricing and market stability [2] - Viterra's head office must remain in Regina for at least five years to protect Canadian jobs [2] Financial and Operational Impact - The merger is expected to generate $250 million in annual gross pre-tax operational synergies within the first three years [12] - The transaction is anticipated to be accretive to Bunge's adjusted earnings per share in the first full year post-closing, with further improvements as synergies are realized [12] - Bunge's shares have lost 14% over the past year, underperforming the industry's 1.7% growth [3] Market and Competitive Concerns - The Canadian Competition Bureau identified localized concerns regarding canola purchases in Nipawin, SK, and Altona, MB, as well as canola oil sales to a small segment of customers in Eastern Canada [14] - The Bureau concluded that there are no specific competition concerns for grain purchasing in Eastern Canada and most of Western Canada, or for the sale of the majority of downstream refined and specialty oil products [4] Strategic Benefits of the Merger - The merged entity will have an enhanced global network with a diversified agriculture portfolio covering all major crops [5] - The combination of complementary assets and distribution networks will connect major production regions to areas of fastest-growing demand, improving geographical balance and adaptability of global value chains [5] - The merger will enhance Bunge's innovation capabilities, addressing food security, market access for farmers, and sustainable food, feed, and renewable fuel production [15] - Significant incremental network synergies are expected from joint commercial excellence opportunities, vertical integration efficiencies, and improved logistics optimization [15] Stock Performance and Alternatives - Bunge currently carries a Zacks Rank 4 (Sell) [6] - Better-ranked stocks in the basic materials space include Carpenter Technology Corporation (Zacks Rank 1), International Paper Company (Zacks Rank 1), and Fortuna Mining Corp. (Zacks Rank 2) [6] - Carpenter Technology's shares have surged 198.5% in the past year, with a Zacks Consensus Estimate for fiscal 2025 earnings of$ 6.77 per share, indicating 42.8% year-over-year growth [16] - International Paper's shares have gained 49% in the past year, with a Zacks Consensus Estimate for 2025 earnings of $3.02 per share, reflecting a 156% year-over-year increase [16] - Fortuna Mining's shares have risen 24% in the past year, with a Zacks Consensus Estimate for 2025 earnings of 56 cents per share, indicating a 17.7% year-over-year rise [13]