US-based agribusiness and food company Bunge Limited is acquiring a 70 per cent stake in oil and fat major IOI Loder Croklaan from its Malaysia-based owner and oil plantation major IOI Corporation Bhd for $946 million.
The transaction will expand Bunge’s value-added capabilities, reach and scale across core geographies to establish it as a giant B2B oil solutions company, a statement from the White Plains, NY company said on Tuesday.
Further, in addition to strengthening Bunge’s Food & Ingredients business with a broader portfolio of value-added products, the transaction is also set to diversify Bunge’s manufacturing and R&D network across core geographies, which includes establishing a stronger presence in fast-growing Southeast Asia, the home to Loders parent company IOI Corp.
The deal also finds rationale in the fact that Loders is claimed as a leader in the growing $33 billion semi-specialty and specialty B2B oils market with a portfolio that includes the full range of palm and tropical oil-derived products with strength in confectionery, bakery and infant nutrition applications. It serves food industry customers in more than 100 countries and clocked $1.6 billion in revenue for 2016 fiscal.
“This complete seed and tropical oil portfolio will position Bunge to be a full service partner and uniquely able to help our customers innovate and grow for the future. We are excited about the benefits that this combination will create for Bunge’s shareholders, as well as for the employees, customers and business partners of our companies,” said Bunge’s CEO Soren Schroder.
This is second such deal within a month where a western food major had increased its exposure to the Asian food market which is considered to be a high growth and high demand market with a rising middle class and increasing income levels arming the people to purchase processed food. In August, American food processing major Archer Daniels Midland (ADM) raised its stake in Singapore-based agribusiness group Wilmar International for $94.67 million increasing its stake to 24.9 per cent now.
Further, with palm oil being an important ingredient in most processed foods, Southeast Asia provides for the raw material with abundant oil palm plantations in countries like Malaysia and Indonesia.
Coming back to the current deal, as a barter, Bunge will also have an enhanced footprint in Europe and North America. After closing, Loders will have exposure to new markets where Bunge has a strong presence, including Latin America and India.
As part of the transaction, for a period of five years after closing, Bunge will have the right to purchase the remaining interest in Loders from IOI, and IOI will have the right to sell its interest to Bunge. The combined business will establish a five-member board of directors consisting of three Bunge representatives and two IOI representatives.
Loders will retain its brand and operate as part of Bunge’s Food & Ingredients business with key management team members expected to remain with the combined business.
To fund the acquisition Bunge has entered into a $900 million, unsecured, delayed draw, three-year term loan agreement with Sumitomo Mitsui Banking Corporation, which may be used to finance the acquisition. The transaction is expected to close in the next 12 months.