Grain Giants Merger in the Hands of the Regulators

By Glenn Dyer | More Articles by Glenn Dyer

Australia’s competition regulator the ACCC will play a powerful role in determining the final shape of the proposed merger of global grain giants Bunge and Viterra.

But on the face of it the ACCC probably won’t cause too much concern and will probably welcome the merger as providing a bigger competitor to the existing majors, CBH and GrainCorp, as well as United Malt which is itself facing a takeover.

Tuesday saw Bunge and the Glencore-backed Viterra confirm plans for a $A34 billion merger which would create one of the world’s largest agriculture trading firms.

The proposed deal will see Bunge grow its revenue to more than $US67 billion and its global scale to rival that of the huge Archer-Daniels-Midland, Louis Dreyfus and Cargill.

For that reason the merger will be examined closely by antitrust regulators in the US, Europe, India, China, Brazil, Argentina, and Australia, as well as Canada.

Two major Canadian investment funds which control 50.01% of Viterra (Glencore has the other 49.99%) will become big shareholders in the new company, as will Glencore. Together they will control 30% of the new company but will have to sign shareholder standstill agreements after the merger closes. That’s to stop any destabilising takeover activity.

Bunge is already the world’s largest oilseed processor and Viterra’s crushing businesses could face regulatory scrutiny in Canada, Argentina as well as Australia which is one of the world’s biggest canola growers.

Bunge was the largest corn and soybean exporter from Brazil in 2022, Viterra was the third-largest corn exporter and No. 7 soybean shipper.

Combined, the companies accounted for about 23.7% of Brazil corn exports in 2022 and 20.9% of Brazil soybean exports.

In the US, Viterra  expanded its grain trading operations with the purchase of Gavilon last year. The Viterra merger would enhance Bunge’s grain exporting and oilseed processing businesses in the world’s No. 2 corn and soy exporter, where it has a smaller presence than ADM and Cargill.

The deal also expands Bunge’s physical grain storage and handling capacity in Australia, where the company currently operates just two grain elevators and a port terminal at Bunbury in the south of WA.

Viterra is the dominant grain handler in South Australia, with 55 receival sites in SA and western Victoria, and six port terminals at Port Adelaide’s Outer Harbour and Inner Harbour, Port Giles, Thevanard, Port Lincoln and Wallaroo.

The majors in Australia are CBH in WA (WA is the major exporting state) and GrainCorp in the east. Cargill also operates here.

The ACCC will give a good idea of its attitude to the Bunge-Viterra proposal when it releases its views on the proposed $5 a share takeover offer for United Malt by French malting giant Malteries Souffle.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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