Bunge Ltd, a leading U.S. grains merchant and the world’s largest soybean processor, is reportedly in talks for a potential merger with Viterra, a rival company owned by Glencore Plc. Analysts suggest that this mega deal would not only expand the businesses of the combined entity in the United States, Brazil, and Australia but also raise concerns regarding competition in Canada and Argentina due to overlapping oilseed processing assets.
If the merger goes through, the new company would strengthen its presence in North America and Europe, positioning itself closer to leading rivals such as Archer-Daniels-Midland Co and Cargill Inc. Seth Goldstein, an equity analyst with Morningstar, suggests that certain divestitures may be required in South America to ensure competition remains intact.
J.P. Morgan equity research estimates that the merged company’s market capitalization would be around $25 billion, in comparison to Archer-Daniels-Midland Co’s market cap of $38.9 billion.
In the United States, the merger would enhance Bunge’s grain exporting and oilseed processing businesses, as Viterra’s purchase of Gavilon last year has significantly expanded its grain trading operations. The acquisition of Gavilon would provide Bunge with a stronger grain sourcing network to support its oilseed processing plants and export terminals.
However, the companies face some overlap in their canola crushing businesses in Canada, which may require the sale of certain assets to receive regulatory approval. Both Bunge and Viterra operate canola crushing plants in close proximity in southern Manitoba and eastern Canada.
In Brazil, the merger would create a dominant exporter, as Bunge was the largest corn and soybean exporter in the country last year, while Viterra ranked third in corn exports and seventh in soybean exports. The companies accounted for a significant portion of Brazil’s corn and soybean exports.
Antitrust agencies in Brazil and Argentina will closely examine the potential merger’s impact on their respective domestic markets. In Argentina, the merged company’s dominant share of soy processing may come under scrutiny, although it is expected to remain below 25% of the market.
