Bunge to buy Corn Products for $4.8 bln, incl. debt; Corn Products' stock up - update 2

(RTTNews) - Monday, agribusiness and food company Bunge Ltd. (BG | Quote | Chart | News | PowerRating) announced a deal to acquire Corn Products International, Inc. (CPO | Quote | Chart | News | PowerRating) for about $4.8 billion, including the assumption of Corn Products' net debt of about $414 million. The combination is expected to create a larger and more diversified company in the field of agribusiness and food products. Following the announcement, Corn Products' shares have climbed more than 21% on the NYSE, while shares of Bunge dropped over 7%.

Under the terms of the deal, Corn Products stockholders will receive common shares of Bunge with a market value of $56 for each common share of Corn Products. The transaction is expected to close in the fourth quarter of 2008. Upon the completion of the transaction, Corn Products will become a wholly-owned subsidiary of Bunge and Corn Products stockholders will own approximately 21% of Bunge's fully diluted shares. Corn Products' Chairman, President and Chief Executive Officer Sam Scott will join Bunge's Board.

Commenting on the deal, Bunge's Chief Executive Officer Alberto Weisser said, "Combining with Corn Products provides a unique opportunity for Bunge to establish an integrated, global presence in the corn value chain, which is highly complementary to our existing operations."

In 2007, Bunge reported net income of $778 million and generated total segment EBIT of $1.23 billion. During the same period, Corn Products reported net income of $198 million and operating income of $347 million. With the acquisition, Bunge expects to achieve estimated annual cost synergies and incremental profit opportunities of $100 million to $120 million. Bunge also expects savings in areas such as procurement, logistics and elimination of duplicate costs. Additionally, the all-stock transaction strengthens the company's balance sheet for future growth.

After the merger, Bunge will have approximately 32,000 employees, with operations in 40 countries. Corn Products will maintain its operational headquarters in Westchester, Illinois, and continue its commitments to the local communities using the Corn Products brand name. Both the companies do not expect that the transaction will lead to the closure of any of their industrial facilities.

Bunge said that the combined company will be well positioned to serve the growing global demand for a broad array of agribusiness and food products, while the global market for sweeteners and starches is expected to grow at about 5% per year. Further, the combination will bring together both the companies' strengths in core geographies, including the U.S., Brazil and Argentina. The transaction will also help the companies to build on each other's asset networks to expand in developing geographies, such as China, Mexico, India, South America, Southeast Asia and Africa.

Also, the combined company will have increased presence in shared customer segments, such as processed food, bakery, animal feed and brewing.

Bunge said that Credit Suisse Securities (USA | Quote | Chart | News | PowerRating) LLC and Morgan Stanley and Co. Incorporated are acting as financial advisors and Shearman & Sterling LLP as legal advisor. For Corn Products, Lazard is acting as financial advisor and Sidley Austin LLP as legal advisor. In addition, J.P. Morgan Securities Inc. provided a fairness opinion to the Board of Corn Products.

In a separate release, Bunge said that it now expects full-year earnings in the range of $9.35 - $9.65 per share, compared to its earlier outlook range of $7.10 - $7.40 per share. Analysts have a consensus earnings estimate of $7.70 per share for fiscal 2008. Bunge attributed the updated outlook to better than expected performance in its agribusiness and fertilizer segments.

"Today's volatile, high price environment creates both opportunities and challenges for participants throughout the food production chain. In Bunge's role as a physical link between farmers and customers, prudent management of working capital and risk will continue to be essential in the coming months," Jacqualyn Fouse, Bunge's chief financial officer, said.

Bunge's second-quarter results are scheduled to be released on July 24. For the sequentially preceding quarter, Bunge's profit was up, helped by strong demand for agricultural products and higher prices. The White Plains, New York-based company earned $289 million, or $2.10 per share, for the quarter on sales of $12.47 billion.

Meanwhile, Corn Products' first-quarter net income was $64 million, or $0.85 per share, higher than last year on 22% sales growth. While announcing the first-quarter results, Corn Products lifted its fiscal 2008 earnings per share outlook to a range of $2.90 - $3.15 per share from its earlier forecast range of $2.65 - $2.85 per share. The forecast included a $0.05 gain from the company's holdings in CME Group Inc. (CME | Quote | Chart | News | PowerRating).

In late May, Corn Products raised its quarterly dividend by 17% to $0.14 per share from $0.12 per share. This was the company's second common stock dividend increase in 2008. The increased dividend will be payable on July 25 to stockholders of record at the close of business on June 26.

Corn Products also held its 2008 Annual Meeting in May. Stockholders elected three directors to new, three-year terms expiring in 2011. Those elected included Richard Almeida, former Chairman and Chief Executive Officer of Heller Financial, Inc., Gregory Kenny, President and Chief Executive Officer of General Cable Corporation and James Ringler, Chairman of the Board of Teradata Corporation.

BG is trading at $112.91 on the NYSE, down $9.26, on a volume of 5.8 million shares.

CPO rose $9.25 and is trading at $52.15 on a share volume of 6.93 million shares.

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