Shares of agricultural and food products and solutions provider Bunge Limited (NYSE:BG) are trending lower today after the company agreed to merge with Viterra in an $18 billion stock and cash deal. The combination is expected to create a global agribusiness entity with enhanced geographic diversification, a global network, and more operational flexibility.
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Under the deal, Viterra investors will receive 65.6 million Bunge shares at a value of ~$6.2 billion along with $2 billion in cash. Additionally, Bunge will also take on $9.8 billion of Viterra debt. Moreover, Bunge also plans to buy back its shares worth $2 billion to boost accretion to its bottom line. Consequently, Viterra investors will own about 33% of the combined entity upon completion of the repurchase.
The business combination is anticipated to close in the middle of 2024 and remains subject to closing conditions and approvals. Canada Pension Plan Investment Board (CPP) has lent its support to the transaction and will own about a 12% stake in the combined entity while also receiving $0.8 billion in cash.
Upon announcement of this transaction, S&P Global upgraded Bunge to BBB+ from the earlier BBB while noting that the company’s low debt levels provided it the maneuverability to undertake this deal without putting significant pressure on its credit measures.
Bunge shares have dropped nearly 6% over the past year while the price-to-earnings multiple of the stock currently stands at nearly 9.2x.
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