Bunge buys into sweeteners with Corn Products acquisition

By Jess Halliday

- Last updated on GMT

Related tags: Starch, Corn syrup, Sweeteners

Bunge has announced the signature of a definitive agreement to
acquire Corn Products International for around $4.8bn, a major deal
that plunges it into the high-potential sweeteners market.

Bunge currently has activities in edible oils, milling products, fertilizer and other agribusiness. By buying Corn Products, it will extend its portfolio of ingredients to higher value sweeteners and starches, at a time when the global market for these kinds of products is growing by around five per cent per year. The acquisition has already been approved by shareholders of both companies and is expected to close in Q4. The price tag includes assumption of around $414m of Corn Products' net debt. Alberto Weisser, Bunge's chairman and CEO, called Corn Products "a leading pure-play franchise in corn refining".​ It is one of the world's major suppliers of dextrose, and a big regional player in starch, high fructose corn syrup, and glucose. In April Corn Products also added a stevia-derive sweetener to its line, when it signed an exclusive license agreement with Japan's Morita Kagaku Kogyo Company Ltd for its patented stevia strain, sold under the brand Enliten. It comes with access to the manufacturing technology and production of the zero-calorie, low glycemic index sweetener, and global marketing and distribution rights. Weisser added that the acquisition of Corn Products will expand Bunge's operations in important growth markets. Both companies are already strong in the US, Brazil and Argentina; by bringing their networks together they have identified big opportunities for growth in China, Mexico, India, Southeast Asia and Africa - as well as other South American countries. It is also expected that they will be able to benefit from each others' customer bases. "By creating common and more efficient distribution channels and improved sales and product development capabilities, the combined company will be able to increase its presence in shared customer segments, such as processed food, bakery, animal feed and brewing, while serving a larger and more diverse set of customers overall,"​ said Bunge. By combining activities in procurement and logistics, and taking out duplicate costs, it is expected that the combination of Bunge and Corn Products will result in annual savings of between $100m and $120m. When the transaction closes, the combined company will a total number of 32,000 employees worldwide. Corn Products will keep on trading under the same name out of its headquarters in Westchester, Illinois. It is not expected that any of its facilities will close as a result of the buy-out. In 2007, Corn Products reported net income of $198m and operating income of $347m. Fifty-seven percent of this came from sweetener products (high fructose corn syrup, glucose corn syrups, dextrose), and 22 per cent from starch-based products (industrial and process food starches, fermenration). Twenty-one per cent of sales came from co-products - that is, refined corn oil and corn gluten Bunge reported net income of $778m in 2007, and EBIT of $1230m. Today Bunge updated its full year guidance from $7.10 to $7.40 per share, to $9.35 to $9.65 per share. This is due to firm demand in core markets, despite pressure from commodity prices. "Generally oilseed processing margins are strong around the world​," said the company, which also cited favourable fertilizer prices as acting in its favour. A recent report by Freedonia revealed that the US sweetener market alone is poised to increase 4 percent per year at present, to reach over $1bn in 2010.

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