Bunge expected to downplay stake in G3, as questions surround merger with Viterra

The official announcement this week of a deal to merge Bunge and Viterra raises a series of questions about how farmers, customers, and both companies’ operations will be affected by the marriage of the two global agribusinesses under the Bunge name.

When it comes to the Canadian market, farmers and politicians are voicing concerns about decreased competition, as both companies hold varying degrees of ownership in grain elevators, oilseed crush plants, and port terminals that operate in overlapping markets in western and eastern Canada.

However, several grain industry veterans tell RealAgriculture they don’t see any major problems. They see the companies’ global assets complementing each other, and opportunities for the combined company in the area of renewable fuels.

Bunge’s stake in G3

The Competition Bureau has already indicated it will be reviewing the deal, which will include scrutiny of Bunge’s stake — believed to be a 25 per cent share — in Winnipeg-based grain company G3 Global Grain Group.

G3 was formed as a joint venture between Bunge and the Saudi Agricultural and Livestock Investment Company (SALIC) to buy the Canadian Wheat Board’s assets in 2015. At the time, G3 was majority-owned by Bunge, but SALIC has since acquired majority control.

G3 has built a network of new high capacity grain elevators across the Prairies, as well as a new grain terminal at the Port of Vancouver, which operate near similar facilities owned by Viterra.

While Bunge is not commenting publicly on the specifics, a source familiar with the company’s thinking is downplaying the company’s relationship with G3.

They say Bunge is a passive minority investor that does not have operational control over G3, its elevators, or its port facilities.

“Bunge does not participate in G3’s negotiations with suppliers and customers, and its commercial interactions with G3 are all at arms-length,” they tell RealAgriculture.

It remains to be seen how the Competition Bureau will view Bunge’s stake in G3, as the threshold for “significant interest” in a company is not clearly defined in the federal Competition Act.

“Should we determine that a proposed transaction is likely to harm competition, we will take appropriate action,” the Bureau says.

Bunge’s oilseed business meets Viterra’s grain business (and plans for huge canola crush plant at Regina)

Since Bunge’s main assets in Western Canada are canola crush facilities, the deal has also raised questions about the future of Viterra’s plan to build a massive 2.5 million tonne per year canola crush facility north of Regina, Sask.

Decision-makers with the combined company have not yet received an anticipated briefing on the Regina crush project, but it remains an attractive investment, according to the source familiar with the deal. They also say Bunge intends to grow its Canadian agricultural operations after the merger.

Planning is to begin in the coming months on integrating Bunge’s oilseed business with Viterra’s grain business.

The Competition Bureau will likely also be looking at both companies’ canola crush assets in Manitoba, as Viterra owns a canola processing facility at Ste. Agathe, less than 75 kilometres from Bunge’s newly-expanded canola crush facility at Altona.

The future of Viterra’s Canadian headquarters in Regina

According to the source, the combined company intends to “maintain its important regional office presence” in Regina, the home of Viterra’s Canadian headquarters dating back to the company’s roots in the Saskatchewan Wheat Pool.

The deal values Viterra at approximately US$8.1 billion, and would see Viterra’s shareholders, including Glencore and the Canadian Pension Plan Investment Board, own around 30 per cent of the combined company.

Assuming the deal goes ahead, the combined company will be headquartered in St. Louis, Missouri, with a board of directors consisting of eight directors nominated by Bunge and four representing Viterra’s shareholders.

The merger is expected to take about a year — until mid-2024 — to close, subject to shareholder and regulatory approvals in multiple countries, including Canada, the U.S., Australia, and Argentina.

Related:

Bunge and Viterra announce merger agreement

G3 Global Grain Group (Bunge & SALIC Canada) takes on majority ownership of CWB

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