Headquartered in Moose Jaw, Global Ag Risk Solutions provides industry-leading whole-farm insurance solutions, including parametric solutions and weather modeling technology, to help clients protect the cost of crops and their profit. Their focus on the agribusiness and farm industry supports Hub’s Specialty practices by complementing and strengthening its existing capabilities.

“We are excited to welcome the Global Ag Risk Solutions team to Hub,” said President of Hub Prairies Ryan Matthews. “They will elevate our expertise and offerings in the region, providing clients with the support they look for as they go into each farming season.”

“We look forward to starting our journey with Hub,” said Executive Vice-President of Global Ag Risk Solutions Dave Sullivan. “Hub’s reputation in the market and the depth and breadth of expertise and resources will provide a strong foundation for delivering outstanding service to our clients and for our continued growth.”

Global Ag Risk Solutions will be referred to as Global Ag Risk Solutions, a Hub International company.

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The merger, which would create a company worth US$34 billion including debt, would bring the combined company closer in global scale to Bunge’s leading rivals ADM and Cargill.

The proposed combination with Glencore-backed Viterra, however, is attracting scrutiny from regulators concerned about consolidation in the agricultural sector.

Heckman told Reuters healthy commodities market competition in Canada, the U.S., Brazil, Argentina, China and parts of Europe should allow Bunge to avoid having to sell assets to gain approval for the merger from antitrust authorities.

But if asset liquidations are required, Bunge believes demand for its assets is very strong, Heckman said at Reuters’ Transform Food USA event in Minnesota.

“If we have to sell some assets, everybody has called to be on the list to buy them. We’ll get a very fair price,” he said.

Bunge expects to finalize the deal by mid-2024 after closing conditions are met and regulators sign off on the deal.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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Bunge on Thursday announced the results of an extraordinary general meeting of shareholders, in which they approved the acquisition of Viterra and a related issue of about 65.6 million Bunge common shares.

As outlined when the proposed deal was announced in June, Bunge’s deal would see Viterra shareholders receive that amount of Bunge common shares, valued at about US$6.2 billion, plus about US$2 billion cash. Ultimately Viterra shareholders would own about 33 per cent of the merged company, after a related share repurchase plan is complete.

Bunge shareholder approval was among the “closing conditions” the company must meet, as well as regulatory approvals from several countries, to close the deal as planned in mid-2024. The company reiterated Thursday the merger is still expected to close at that time.

According to a separate filing Thursday with the U.S. Securities and Exchange Commission, that vote ran about 117.85 million Bunge shares in favour to 1.25 million against, with 355,464 shares abstaining.

“We appreciate our shareholders’ vote of confidence in our strategy to position Bunge as a premier global agribusiness solutions company through the merger with Viterra,” Bunge CEO Greg Heckman said Thursday in a release.

“Our team is focused on effectively running our operations while also planning for a successful integration.”

Among the regulatory approvals pending, Canada’s federal transport ministry and Competition Bureau have both said they have the proposed Bunge/Viterra combination under review.

Several Canadian farmer groups are pressing for further government interventions. The National Farmers Union in June called for the federal government to instead “make a counter-offer to purchase Viterra and return its assets to the control of Canadian farmers and workers through a new co-operative.”

Citing concerns over competition and market consolidation, Saskatchewan grain grower groups including the Agricultural Producers Association of Saskatchewan (APAS), SaskCanola, Sask Wheat and SaskBarley last week jointly called on that province’s government to run a separate risk assessment of the deal.

While now headquartered in Rotterdam in the Netherlands, Viterra’s roots are sunk deep in Western Canada, having formed from the 2007 merger of Saskatchewan Wheat Pool with Agricore United, the latter firm being a merger of the combined Manitoba and Alberta pools with United Grain Growers.

Regina-based Viterra went international in 2009 with a deal for Australia’s ABB Grain, then was majority-acquired by commodity firm Glencore in 2012, becoming Glencore Agriculture before rebranding as Viterra internationally in 2020.

The deal is likely to face close regulatory scrutiny in Canada, given Viterra’s significant stakes in Prairie grain handling, oilseed crushing and port terminal capacity — along with Bunge’s stakes in Canadian crushing and its part-ownership of Prairie grain handler G3.

Bunge’s shareholder meeting on Thursday also saw a separate vote, by a similarly wide margin, to approve a plan to change the place of incorporation and residence of the Bunge Group’s parent company from Bermuda to Switzerland.

That plan, Bunge said, also remains “subject to various conditions” including approval from the Supreme Court of Bermuda. — Glacier FarmMedia Network

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Last month, Campbell Soup struck a $2.7 billion deal for Rao’s sauce maker Sovos Brands (all figures US$). Unilever bought premium frozen yogurt brand Yasso in North America, while Snickers maker Mars acquired healthy foods maker Kevin’s Natural Foods.

“There’s been a nice uptick in M+A (mergers and acquisitions) in the food industry in the first half of the year…,” said Michael Milani, executive managing director and principal at advisory firm Baker Tilly.

“It has been a big theme, and we expect that to continue in the back half of 2023 and into early 2024.”

This is despite higher borrowing costs straining companies looking for acquisitions.

The value of deals in the U.S. food and beverage industry slipped nearly three per cent to about $10.39 billion this year, according to LSEG data. But their volumes climbed 17.5 per cent to 248 as of Sept. 1, making the industry a bright spot in dealmaking.

The total number of deals across all industry sectors slid four per cent in the same period, data showed.

“Large food companies need to add more new concepts, new flavour profiles and new food items because their old brands — though still growing — are not growing at a meaningful rate,” Milani said.

The rise in deals comes as volume of sales at companies such as Kraft Heinz and Campbell fell for at least the past six quarters due to weak demand, while benefits from price hikes also fade.

“I would expect there to be a continued drumbeat of M+A,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management, which holds shares in PepsiCo and Mondelez International.

Packaged food companies “are now faced with some difficult comparisons on organic (sales) and are seeking some strategic, category-specific M+A targets that will propel them through the next few years,” Henry said.

Cheerios cereal maker General Mills has pinned M+A as a key goal in the coming years, with executives saying it is a “good environment for M+A right now.”

For Mondelez, bolt-on acquisitions are the way to go, the Oreo maker’s finance chief Luca Zaramella had recently said at a Barclays conference.

Last month, Reuters reported that Twinkies snack cakes maker Hostess Brands was exploring a sale and that Mondelez and Hershey could be in the race to buy it.

J.P. Morgan analysts said they could be eyeing Hostess to expand outside of North America.

“Most of the large cap packaged food companies have … diligently reduced their debt and improved their balance sheet (through the pandemic)…so they have the risk capacity and risk appetite to pursue large-scale acquisitions,” CFRA Research analyst Arun Sundaram said.

“These packaged food companies need to continue finding ways to stay relevant … And so one of the easiest ways to do that is through M+A.”

— Reporting for Reuters by Deborah Sophia in Bangalore.

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The deal marks the conclusion of a drawn-out auction that started in February and attracted interest from several private equity firms. Reuters reported on Tuesday on a so-called earn-out agreement that was key to Roark clinching a deal for Subway.

For the full deal price to be paid, Subway’s cash flow would need to reach certain milestones over a period spanning two or more years after the deal closes, according to the sources. Without the earn-out, the deal is worth $8.95 billion, the sources said (all figures US$).

Earn-out structures, while uncommon in the consumer and retail sector, are increasing in frequency in a challenging market for mergers and acquisitions as a way to reconcile price differences.

The sources said the arrangement helped bridge a gap in the valuation expectations between Roark and the DeLuca and Buck families that own Subway, which started up nearly 60 years ago in Connecticut.

The families were hoping to fetch more than $10 billion for Subway based on its strong brand and international growth, but the private equity firms countered it was worth less because they deemed its U.S. business saturated.

Roark prevailed over a rival bidding group led by buyout firms TDR Capital and Sycamore Partners, whose final offer was for $8.75 billion including an earn-out, and $8.25 billion without, the sources said.

Roark, which owns other restaurant operators and franchises — including rival U.S. sandwich chain Jimmy John’s — will pay Subway’s owners a break-up fee equivalent to four per cent of the deal’s value should antitrust regulators thwart the deal, one of the sources said.

The deal contact allows for 12 months for the transaction to be completed, according to the sources.

Roark took the view that the restaurant market is too fragmented for the deal to raise competition concerns, the sources added.

Jimmy John’s has more than 2,600 restaurants in 43 U.S. states. Subway has more than 37,000 restaurants in over 100 countries, including 21,350 in the U.S. and 3,135 in Canada.

Roark and Subway, which announced the deal on Thursday, declined to comment on the terms.

Roark currently controls Inspire Brands, the owner of restaurant chains including Jimmy John’s, Arby’s, Baskin-Robbins and Buffalo Wild Wings.

Its experience of helping restaurant brands grow will be helpful, “especially in the U.S. market where it remains well below the peak it hit a few years ago,” said Neil Saunders, managing director of market research firm GlobalData.

Revamping operations

Tax considerations were part of the calculus to sell Subway. This is because the estate of co-founder Peter Buck, who passed away in 2021, donated his 50 per cent stake in the privately-held company to his philanthropic foundation under the terms of his will. This offers a shield from taxes on the sale of the stake.

Founded in 1965 by 17-year-old Fred DeLuca and his family friend Buck, Subway has been owned by the founding families since its first restaurant opened as “Pete’s Super Submarines” in Bridgeport, Connecticut.

The Milford, Connecticut-based company has been revamping its operations to deal with outdated decor and $5 deals on foot-long sandwiches that eroded franchisees’ profits. In 2021, the chain launched a menu overhaul and splashy marketing campaign as it embarked on a turnaround plan that has helped sales grow.

Subway, which has closed thousands of U.S. locations since 2016, said a year ago that it wants to shift away from its current base of small franchisees that own just one or two shops, which tend to be family-run and sometimes barely scrape by.

The company saw a 9.85 per cent increase in same-store sales in the first half of 2023. Its 12-month earnings before interest, taxes, depreciation and amortization are around $800 million, according to the sources.

— Reporting for Reuters by Anirban Sen and Abigail Summerville in New York and Deborah Sophia in Bangalore.

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Sources last week said Bunge and Viterra were in talks for a potential mega deal that would further consolidate global agriculture trading and bring Bunge closer in global scale to leading rivals ADM and Cargill.

“Combining Bunge and Viterra in regions like North America and Europe certainly would strengthen the combined company’s presence there and put them more on par with ADM,” said Seth Goldstein, equity analyst with Morningstar.

“Bunge is already the leader in South America. That might be a region where there might be some divestitures required if a deal were to close there to make sure that there’s still competition,” he added.

J.P. Morgan equity research estimated the combined company’s market cap would be around $25 billion, compared with ADM’s $38.9 billion market cap (all figures US$).

In the U.S., Viterra’s business of buying and selling grain expanded via its purchase of Gavilon last year. A merger would enhance Bunge’s grain exporting and oilseed processing businesses in a place it has a smaller presence than ADM and Cargill, one analyst said.

Bunge had sold 35 of its U.S. grain elevators to Zen-Noh Grain in 2020 as it sought to pare back underperforming assets. Bringing in Gavilon’s grain sourcing network would help feed Bunge’s nine U.S. oilseed processing plants and its two export terminals at the Gulf Coast and the Pacific Northwest.

But in Canada, the companies have some overlap in their crushing businesses, which buy canola from farmers and turn it into vegetable oil and livestock feed.

Bunge is the world’s largest oilseed processor.

Bunge and Viterra each crush canola on the Canadian Prairies — including plants in close proximity in southern Manitoba — as well as in Eastern Canada. Antitrust authorities may require some of those assets be offloaded before approving the merger, some analysts said.

Canada’s Competition Bureau declined to comment.

The two companies united would also create a dominant exporter in Brazil and a market-leading soybean crusher in Argentina, analysts said.

Bunge last year was the largest corn and soybean exporter from Brazil, the world’s top source of the staple crops for making animal feed and biofuels, according to data from shipping agent Cargonave. Viterra was the third largest corn exporter and No. 7 soybean shipper.

Combined, the companies accounted for about 23.7 per cent of Brazil corn exports in 2022 and 20.9 per cent of Brazil soybean exports, Cargonave data showed.

However, an analysis by Brazil’s antitrust agency CADE would focus on a potential merger’s effects on the domestic market, said Sao Paulo based antitrust lawyer Vicente Bagnoli, who is not involved in the deal.

“I think CADE would not block this deal because there are other competitors on the market,” he said.

Regulatory authorities may focus on a merged company’s dominant share of soy processing in Argentina, the world’s biggest exporter of soymeal and soy oil, although Goldman Sachs research noted that capacity would remain under 25 per cent of the market.

Argentina’s National Commission of Defense of Competition declined to comment.

A merger would expand Bunge’s physical grain storage and handling capacity in major wheat exporter Australia, where the company currently operates just two grain elevators and a port terminal in the western part of the country. Viterra has 55 storage sites in South Australia and western Victoria and six bulk grain export terminals.

The marriage would also unite Bunge, the largest oilseed meal producer in the world, with Australia’s biggest protein meal importer Viterra.

In Ukraine, the world’s top sunflower producer and largest supplier of sunflower oil, a combined Bunge-Viterra would have three oilseed processing plants across the country’s south and east, in Kharkiv, Dnipro and Mykolaiv.

— Reporting for Reuters by Karl Plume in Chicago, Rod Nickel in Winnipeg, Ana Mano in Sao Paulo and Maximilian Heath in Buenos Aires.

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The board, which oversees U.S. freight railroads, is imposing some requirements on the deal, which was agreed in 2021, including an “unprecedented seven-year oversight period along with extensive data-reporting requirements.”

The acquisition, which combines the sixth- and seventh-largest railroads operating in the U.S. by revenue, will create the first railroad providing a single-line service spanning Canada, the U.S. and Mexico. It is projected to add 800 new unionized operational jobs in the U.S. and will shorten the average length of trains by just under 20 per cent.

CP CEO Keith Creel said in a statement that the board’s decision “clearly recognizes the many benefits of this historic combination. As the STB found, it will stimulate new competition, create jobs, lead to new investment in our rail network, and drive economic growth.”

In the same statement, Kansas City Southern said the decision “is the catalyst for realizing the benefits of a North American railroad for all of our stakeholders.”

The decision is effective on April 14 and calls for reconsideration petitions to be filed by April 4. Calgary-based CP’s TSX-traded shares rose about six per cent to C$105.74. Kansas City Southern shares were transferred to a trust and the railroad has operated independently ahead of the board decision.

The STB said it expects the new single-line service will foster the growth of rail traffic and reduce emissions by shifting approximately 64,000 truckloads annually from North American roads to rail.

It also concluded that the deal will not increase safety risks in any meaningful way, an issue that has been raised in the wake of a recent Norfolk Southern derailment in Ohio. It noted CP has had the best safety record of any large railroad over the last 15 years.

The STB also approved measures to address “potential environmental impacts of the transaction, such as increased noise,” and it will require the railroad to justify “rate increases over a certain level” on some interline movements.

The deal will also foster new U.S. passenger railroad Amtrak service opportunities, the board said.

The new direct service will facilitate the flow of grain from the U.S. Midwest to the Gulf Coast and Mexico, the movement of intermodal goods between Dallas and Chicago and trade in automotive parts, vehicles, and other goods between the U.S. and Mexico, the STB said.

The board can issue orders to enforce required environmental mitigation measures and address capacity and maintain fluidity in Houston, Chicago and other congested areas, “including preventing potential merger-caused delays and service disruptions of commuter service in the Chicago area.”

This transaction is “end-to-end,” which means there are little to no track redundancies or overlapping routes, and the board said the move will reduce travel time for traffic moving over the single-line service.

At least two U.S. grain grower groups on Wednesday panned the STB’s decision, saying the combination would decrease competition for the rail-reliant grain sector.

“U.S. rail industry consolidation has led to poorer, not improved, service for agricultural shippers,” Vince Peterson, president of U.S. Wheat Associates, said in a release.

“In addition, we see extreme disparity in rates for wheat shippers. Rail rates over the last decade have increased exponentially and rates for wheat are higher than rates for other commodities even with similar handling characteristics.”

The U.S. National Association of Wheat Growers’ (NAWG) CEO, Chandler Goude, said in the same release that the group “maintains our concerns that the merger of CP and KCS will impede competition in the rail market and increase rail rates.”

— David Shepardson reports on the U.S. transport sector for Reuters from Washington. Includes files from Glacier FarmMedia Network staff.

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Under the deal, which was announced last August, Sanderson is being combined with Continental Grain subsidiary Wayne Farms. Sanderson will cease trading on Friday.

The new business, to be called Wayne-Sanderson Farms, will be headquartered at Oakwood, Ga., northeast of Atlanta, and will be led by Wayne Farms CEO Clint Rivers.

Any outstanding issues with the Justice Department were resolved prior to close, according to a person familiar with the matter.

The deal had raised concerns on Capitol Hill, where lawmakers asked for the Justice Department to take a hard look at it because of fear of pushing up prices.

The Justice Department, which had been investigating the deal for antitrust concerns, declined comment.

Chicken wings and breasts have climbed 38 and 24 per cent since February year-over-year, respectively, according to research from Wells Fargo.

The Biden administration, concerned about price hikes in general and especially in the meat sector, announced in January that it would spend US$1 billion and issue new rules as a way to address a lack of “meaningful competition” in meat processing.

— Reporting for Reuters by Diane Bartz. Includes files from Glacier FarmMedia Network staff.

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In a bid to focus on its higher-margin agriculture and construction machine businesses, where data content, autonomous technologies and alternative fuels are increasingly at core, CNH Industrial at the beginning of this year completed the spin-off of its truck, bus and engine operations, now separately listed as Iveco Group.

In slides prepared for the strategy presentation the group, which is controlled by Exor NV, the holding company of Italy’s Agnelli family, forecast net sales of between $20 billion and $22 billion in 2024, up from $17.8 billion last year (all figures US$).

CNH, which houses brands such as Case and New Holland, also guided for a margin on its adjusted operating profit (EBIT) of between 12 and 13 per cent in 2024 from 9.9 per cent in 2021, with that of its agriculture unit increasing to between 14.5 and 15.5 per cent from 12.3 per cent over the same period.

After buying Raven Industries last year for $2.1 billion to bolster its position in precision agriculture and autonomy, CNH will now focus on “disciplined” M+A activity, it added.

“We’re not buying to get bigger, our dollars are going to go towards driving organic growth,” CEO Scott Wine told analysts during the plan presentation.

“Disciplined M+A will be a key part of our strategy going forward.”

The company added it was seeing strong buyer interest for Raven’s engineered films and aerostar units, the two non-core business it plans to sell.

Chief digital officer Parag Garg said CNH was well placed to be leaders in autonomy and help customers throughout the entire farming cycle.

“Automation is a key strength for CNH Industrials tech strategy, already bringing benefits to farmers across the world across the whole cycle and helping build a backbone for it to deliver an autonomous future,” he told analysts.

— Reporting for Reuters by Giulio Piovaccari in Milan and Bianca Flowers in New York.

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