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Bunge to buy Corn Products for $4.4 billion

23/06/2008 - 14:11

NEW YORK (Reuters) - Fertilizer producer and oilseed processor Bunge Ltd said on Monday that it would buy Corn Products International Inc for $4.4 billion to gain a leading position in finished corn products such as starches and sweeteners.

The deal, which unites two of the oldest U.S. agricultural businesses, calls for the exchange of one share of Corn Products for $56 in Bunge stock, a 31 percent premium to the company's closing price of $42.90 on Friday. Bunge expects the transaction to lead to annual synergy benefits of $100 million to $120 million.

Shares of Corn Products jumped to $54.70 in trading before the market opened, while Bunge firmed 3.1 percent

The deal will also expand Bunge's operations in growth markets and diversify its sources of revenue with a "solid cash-flow business," Chief Executive Alberto Weisser said in a statement.

The company also raised its 2008 earnings forecast range by more than $2 a share.

The deal comes as ethanol production, as well as demand for food in developing economies such as India and China, is driving up prices for corn.

The deal is valued at $4.8 billion, including about $414 million of Corn Products's net debt, and Bunge expects the transaction to add to earnings in 2010. Corn Products shareholders will own about 21 percent of Bunge once the deal closes.

The combined company would have about 32,000 employees and operate in 40 countries. Neither company expects to close any industrial facilities as a result of the transaction, Bunge said.

Separately, Bunge raised its 2008 earnings forecast to $9.35 to $9.65 per share from $7.10 to $7.40, not counting the effects of the acquisition, which the company expects to close in the fourth quarter.

Analysts were expecting Bunge to earn $7.59 a share in 2008, according to Reuters Estimates.

"We continue to benefit from good fundamentals in our core markets," Chief Financial Officer Jacqualyn Fouse said in a statement. "Despite the higher commodity prices, customer demand has been firm."

Still, she said, high prices created challenges in food production, and "prudent management of working capital and risk" would be essential in coming months.

Bunge, based in White Plains, New York, is the No. 3 player in global agribusiness by revenue behind Cargill Inc and Archer-Daniels-Midland Co. It has more than 25,000 employees.

Westchester, Illinois-based Corn Products provides corn syrup to beverage makers like Coca-Cola Co , and customers include Kellogg Co , Unilever NV and Nestle SA .

Credit Suisse Securities (USA) LLC and Morgan Stanley and Co Inc are Bunge's financial advisers in the deal. Lazard is Corn Products's financial adviser.

(Reporting by Robert MacMillan and Matt Daily; Editing by Quentin Bryar, Sue Thomas and Lisa Von Ahn)


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