CHICAGO (Reuters) – Bunge (NYSE:BG)’s planned acquisition of Viterra would make the world’s biggest oilseed crusher even more dominant and secure a larger role in the expanding renewable diesel industry, although it may face competition hurdles.
Under the deal to create an agricultural giant worth about $34 billion including debt, Bunge’s crushing capacity will increase by nearly one-third, to 75 million metric tons annually, adding plants in Europe, Canada and Argentina.
The deal would make the combined company better able to capitalize on an anticipated surge in demand for soybean and canola oil to produce biofuels in coming years than its rivals, but more consolidation in the industry leaves farmers with fewer buyers for their crops.
Though its grain trading business is smaller than rivals Cargill and ADM, U.S.-based Bunge is already the world’s largest oilseed processor and producer of vegetable oil. Oils produced primarily from soy and canola are seeing increasing demand from refiners for low-carbon renewable diesel.
“This really accelerates the strategic growth platform that we’ve laid out,” Bunge CEO Greg Heckman said in an interview on Tuesday.
Bunge has in the past two years entered partnerships with oil major Chevron (NYSE:CVX) to crush oilseeds for renewable diesel and seedmaker Corteva (NYSE:CTVA) to tailor crops for biofuel feedstocks. Its investment in startup Covercress gives Bunge access to future supplies of a new low-carbon-intensity oilseed for crushing.
“(Buying Viterra) allows us to fill in some of the areas where we needed additional origination, where we needed to be closer to the farmer to drive regenerative ag and sustainable practices,” Heckman said.
Viterra’s large network of grain shipping terminals and country elevators, particularly in oilseed production regions of North America, Argentina and Europe, would complement Bunge’s existing oilseed processing business, analysts said.
In the United States, the deal marks a reversal after Bunge sold 35 grain elevators in 2021, citing poor profits. Viterra’s elevators have better locations across Bunge’s network, Heckman said.
The Viterra network would aid Bunge’s processing plants by both purchasing oilseeds from farmers and shipping products like livestock meal, analysts said.
“Scale is key in this business and the more points along the value chain you possess, the more opportunity you have,” said Ben Bienvenu, equity research analyst at Stephens.
“Bunge (stock) was a way to express a bullish view on the renewable diesel buildout via equity prior to this deal. And it’s only more so post this deal,” he said.
The U.S. Energy Information Administration said in February that annual U.S. renewable diesel production could more than double by 2025, driven in part by tax credits for renewable fuels under President Joe Biden’s Inflation Reduction Act.
While some developers have canceled or delayed renewable diesel projects due to rising costs, long-term demand for cleaner-burning fuel remains attractive, a factor that likely convinced Bunge to bolster its crushing operations, said Tore Alden, senior agriculture analyst at Fastmarkets, a price reporting agency.
“I think it’s prescient,” he said. “(Bunge) is taking the long-term view that renewable diesel can continue to grow beyond the initial, fervored capacity build-out.”
Soybean oil accounts for 28% of feedstock used to make renewable diesel, and 60% of the feedstock for biodiesel, a biofuel that blends with petroleum diesel, said Matthew Blair, an analyst at TPH&Co.
Viterra’s crushing businesses could face regulatory scrutiny in Canada and Argentina, analysts said. Both have canola-crushing plants in Eastern and Western Canada, including facilities in southern Manitoba.
Canada’s antitrust regulator will review the planned merger, a spokesperson said. Argentina’s competition bureau has not yet received formal notification of the merger, a government source said.
