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Text size [+][-]  Saturday November 7 2009GLOBAL EDITION

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23 Jun 2008 18:24

Gagging on it

By Robert Cyran

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Bunge has agreed to acquire Corn Products International in a $4.4bn all-stock transaction. Each share of Corn Products will be exchanged for $56 of Bunge stock, a 31% premium to the closing price on June 20. Bunge will also assume $414m of Corn Products debt.

The agricultural goods firms estimate the combination will achieve $100m to $120m in annual cost cuts and incremental profit. The deal is expected to close in the fourth quarter.

 
Companies with overpriced stocks are often tempted to use it to buy cheaper competitors. Take Bunge’s $4.4bn purchase of US agriculture group Corn Products. The deal looks slightly value destructive. So why do it? Well, Bunge’s stock is up 50% over the past year.

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