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Bunge Agrees to Buy Corn Products for $4.2 Billion

by Mark Her­li­hy and Choy Leng Yeong
Bunge Ltd., the world’s largest oilseed proces­sor, agreed to buy Corn Prod­ucts Inter­na­tion­al Inc. for $4.2 bil­lion in stock to add corn-based sweet­en­ers as demand increas­es for soft drinks and processed foods in Chi­na and India.

Bunge will pay the equiv­a­lent of $56 for each share of Corn Prod­ucts, White Plains, New York-based Bunge said today in a state­ment. That’s 31 per­cent more than Westch­ester, Illi­nois- based Corn Prod­ucts’ clos­ing price of $42.90 on June 20. Bunge also will assume about $414 mil­lion of Corn Prod­ucts’ debt.

Bunge Chief Exec­u­tive Offi­cer Alber­to Weiss­er, 52, will gain refin­ing oper­a­tions that sell high-fruc­tose corn syrup and food addi­tives to cus­tomers includ­ing Coca-Cola Co. and Pep­si­Co Inc. The addi­tion gives Bunge a port­fo­lio of projects sim­i­lar to U.S. com­peti­tor ADM, which derived 35 per­cent of its oper­at­ing prof­it from corn pro­cess­ing last year.

“Bunge will become a more for­mi­da­ble com­peti­tor in glob­al grain pro­cess­ing by broad­en­ing the prod­ucts it sells to cus­tomers, strength­en­ing cus­tomer rela­tion­ships, dri­ving down costs by com­bin­ing logis­tics and risk man­age­ment, and extend­ing Bunge’s reach into new mar­kets,” Cred­it Suisse ana­lyst Robert Moskow said today in a note.

Corn Prod­ucts is the fourth-largest mak­er of high-fruc­tose corn syrup in the U.S. and will give Bunge new cus­tomers in Pak­istan, South Korea and Thai­land, Moskow said.

Bunge fell $5.87, or 4.8 per­cent, to $116.30 as of 10:35 a.m. in New York Stock Exchange com­pos­ite trad­ing. The shares had risen 4.9 per­cent this year through June 20. Corn Prod­ucts rose $9.99, or 23 per­cent, to $52.89. The stock had risen 17 per­cent this year through June 20.

Corn Refin­ing

Corn Prod­ucts, led by CEO Samuel Scott, 64, was estab­lished in 1906 through a com­bi­na­tion of U.S. corn-refin­ing com­pa­nies. The com­pa­ny process­es corn in South Amer­i­ca and has oper­a­tions in Asia and Africa. In April, the com­pa­ny said first-quar­ter prof­it advanced 29 per­cent to $64.3 mil­lion.

Bunge, estab­lished in 1818 as an import and export firm in Ams­ter­dam, moved its head­quar­ters to White Plains, New York, in 1999. Its shares trad­ed for the first time on the New York Stock Exchange in 2001. Weiss­er paid $1.55 bil­lion in 2002 for con­trol of French veg­etable-oil mak­er Cere­ol SA, and has since added crush­ing and refin­ing assets.

First-quar­ter prof­it surged more than 20-fold to $289 mil­lion as record grain prices boost­ed demand for crop nutri­ents and dis­tri­b­u­tion ser­vices, Bunge said in April.

Corn prices have dou­bled in the past year because of ris­ing demand to pro­duce ethanol and feed live­stock. The World Bank has said 33 coun­tries may face unrest because of surg­ing food costs and deep­en­ing pover­ty.

Bunge said in a sep­a­rate state­ment it raised its earn­ings- per-share fore­cast for this year to a range of $9.35 to $9.65, from $7.10 to $7.40.

The val­ue of the offer was cal­cu­lat­ed using the 74.12 mil­lion shares of Corn Prod­ucts out­stand­ing as of April 30, accord­ing to data com­piled by Bloomberg.

Cred­it Suisse is advis­ing Bunge on the deal.


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