June 24, 2008

Ag Business Bunge Buying Corn Products for $4.4 Billion

CHICAGO _ Corn Products International shares surged by nearly 16 percent, after the Westchester, Ill., maker of starch and high fructose corn syrup agreed Monday to merge with Bunge Ltd. for $4.8 billion.

The deal occurs as food prices have soared, encouraging industry players to manage the increased expenses of corn, oilseeds and other crops through mergers.

"With the very high prices, there's a huge need for working capital," said Bunge Chairman and Chief Executive Alberto Weisser. "Just to keep the same business we have normally, we have to have twice the amount of inventories because the prices are higher and we have to have twice the debt."

Bunge, a New York-based agribusiness with $43 billion in annual revenues, will assume $414 million in debt and pay $56 a share for Corn Products, which traded around $50 on Monday morning.

Corn Products anticipates $4 billion in revenues this year. It reported a first quarter net income of $50 million, a 29 percent increase compared to last year.

The 190-year old Bunge would remain the third-largest company in the space after Cargill Inc. and Archer Daniels Midland Co., although the merger adds corn-based sweeteners and starches to a product mix that includes fertilizer and edible oils.

Bunge and Corn Products anticipate the global market for sweeteners and starches to grow by 5 percent annually.

The combination gives them complementary operations in 40 countries, one which could appeal to customers such as Kellogg's, Coca-Cola and Nestle.

"This merger puts us in a situation where in almost any spot in the world, we can handle the larger customers," said Corn Products Chairman and CEO Sam Scott.

The companies expect to close the deal by the end of the year, after receiving regulatory and shareholder approval.

They estimate annual cost savings of $100 to $120 million, primarily through the elimination of duplicate procurement and logistical expenses. Weisser said layoffs of the 32,000 combined employees would not be a significant factor in the savings.

Corn Products will keep its operational headquarters in Illinois. There are no plans to close any industrial facilities as a result of the merger.


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