A Viterra grain storage facility is shown on Tuesday, March 20, 2012 in Saskatoon.Liam Richards/The Canadian Press
The proposed merger of Canada’s Viterra Ltd. and U.S. rival Bunge Ltd. BG-N is moving ahead with the support of two of Canada’s biggest pension funds, which would emerge as shareholders in the new agribusiness company.
Two sources close to the talks said a deal should be announced within weeks and would create one of the world’s biggest handlers of grains and oilseeds, with the reach and heft to compete with industry leaders Cargill Inc. and Arch-Daniels-Midland Co., both based in the U.S. Midwest agriculture belt.
One of the sources said final details of the merger, such as the ownership levels in the new company, were yet to be determined. So far, there has been no official comment from Viterra, its controlling shareholder, Glencore PLC GLNCY of Switzerland, or Bunge. On Monday, the three companies declined to comment.
The Globe and Mail is not identifying the sources because they were not authorized to speak publicly about the deal.
The sources said the two Canadian pension funds that own half of Viterra, Canada Pension Plan Investment Board (CPPIB), with 40 per cent, and British Columbia Investment Management Corp. (BCI), with 10 per cent, would almost certainly swap their stakes for a stake in Bunge. Glencore, with 49.9 per cent, would do the same.
Spokespeople for CPPIB and BCI declined to comment.
Owning a piece of a more powerful agribusiness player with highly liquid New York-listed shares, plus the cost-cutting potential of putting the two companies together, appeals to the Canadian pension funds, one source said.
He added that the precise exchange ratio has yet to be determined. Since Bunge is bigger than Viterra, Glencore and the Canadian funds would end up as significant minority shareholders. Bunge has a market value of US$14.2-billion, after a one-year drop of 18 per cent, and in 2022 reported sales of US$67.2-billion.
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Bunge reported net income last year of US$1.6-billion; Viterra’s was almost US$1-billion. Based on a measure of their relative profits, Bunge shareholders would own about 60 per cent of the new company. The final ownership might vary considerably, depending on factors such as debt loads, forecasts for growth and profit margins and whether either of the two pension funds would like to take cash for some of their shares.
Glencore and Bunge have held merger talks in the past. In 2017, Glencore offered to buy Bunge but was rebuffed. Since then Glencore has been looking for ways to surface the value in Viterra, which it bought in 2012 for $6.1-billion. Four years later, it sold half of it to CPPIB and BCI. CPPIB paid US$2.5-billion for its 40-per-cent stake.
Gary Nagle, Glencore’s CEO since 2021, has toyed with various ideas to monetize Viterra, Canada’s largest grain handler, whose roots lie in the old Saskatchewan Wheat Pool. An initial public offering was one of the proposals that went nowhere.
At an investor conference in February, Mr. Nagle said, he was keen to do a deal that “allowed the market to get that see-through value … what we believe the business is worth.”
He wants to transform Glencore, the world’s biggest commodities trader and one of the biggest mining companies, into a global metals powerhouse. Merging Viterra with Bunge would be part of that process. The second and bigger part would be merging Glencore with Teck Resources Ltd., Canada’s biggest diversified mining company.
Glencore offered to take control of Teck through a share swap in March, but the Teck board rejected the deal. Glencore now has to decide whether to launch a hostile offer directly to the Class A and Class B shareholders.