Loders is an established leader in the growing $33 billion semi-specialty and specialty B2B oils market. Its portfolio includes the full range of palm and tropical oil-derived products. Shown above: oil palm fruit.
B2B Oils Market Shake-Up: Bunge to Acquire 70% Ownership Interest in IOI Loders Croklaan
Bunge Limited (NYSE: BG), a leading global agribusiness and food company, has announced that it has entered into a definitive agreement to acquire a 70% ownership interest in IOI Loders Croklaan from IOI Corporation Berhad ("IOI") (KLSE:IOICORP) for $9461 million, comprising €297 million and $595 million in cash.
The transaction expands Bunge's value-added capabilities, reach and scale across core geographies to establish Bunge as a global leader in B2B oil solutions. Following the completion of the transaction, Bunge's enhanced product offering will further support the growth of its customers around the world.
Loders is an established leader in the growing $33 billion semi-specialty and specialty B2B oils market. Its portfolio includes the full range of palm and tropical oil-derived products with strength in confectionery, bakery and infant nutrition applications. Loders serves global food industry customers in more than 100 countries around the world and reported fiscal year 2016 revenues of $1.6 billion.
Soren Schroder, Bunge's Chief Executive Officer:
Transaction Details and Financing
Upon completion of the transaction, Bunge will have a 70% controlling ownership interest in Loders. IOI will retain a 30% ownership interest and customary protective rights. As part of the transaction, for a period of five years after closing, Bunge will have the right to purchase the remaining interest in Loders from IOI, and IOI will have the right to sell its interest to Bunge.
The combined business will establish a five-member board of directors consisting of three Bunge representatives and two IOI representatives. As a major supplier of palm oil to the combined business, IOI will be a valued business partner of Bunge.
Loders will retain its brand and operate as part of Bunge's Food & Ingredients business with key management team members expected to remain with the combined business.
Bunge has entered into a $900 million, unsecured, delayed draw, three-year term loan agreement with Sumitomo Mitsui Banking Corporation, which may be used to finance the acquisition. The terms of this loan are similar to those of Bunge's existing credit facilities. The balance may be funded with cash on hand or borrowings under existing credit facilities. Bunge expects to maintain its investment grade credit rating.
Approvals and Closing Timeline
The transaction has been unanimously approved by the Boards of Directors of both Bunge and IOI. The transaction is expected to close in the next 12 months, subject to customary closing conditions, including receipt of required regulatory approvals and the approval of a majority of IOI shareholders.
The transaction expands Bunge's value-added capabilities, reach and scale across core geographies to establish Bunge as a global leader in B2B oil solutions. Following the completion of the transaction, Bunge's enhanced product offering will further support the growth of its customers around the world.
Loders is an established leader in the growing $33 billion semi-specialty and specialty B2B oils market. Its portfolio includes the full range of palm and tropical oil-derived products with strength in confectionery, bakery and infant nutrition applications. Loders serves global food industry customers in more than 100 countries around the world and reported fiscal year 2016 revenues of $1.6 billion.
Soren Schroder, Bunge's Chief Executive Officer:
"This is a compelling transaction for Bunge. It delivers on our stated objective to expand our value-added business by accelerating our growth in B2B semi-specialty and specialty oils.”Julian Veitch, Chief Executive Officer of Loders:
“Together with Loders, we will have a comprehensive product offering derived from seed and tropical oils, with leading innovation, application capabilities and sustainability programs.”
“This complete seed and tropical oil portfolio will position Bunge to be a full service partner and uniquely able to help our customers innovate and grow for the future. We are excited about the benefits that this combination will create for Bunge's shareholders, as well as for the employees, customers and business partners of our companies.”
“The key capabilities that the talented employees of Loders bring in customer intimacy, market knowledge and application development will be a competitive advantage for the combined business.”
“We look forward to welcoming the Loders team to Bunge."
"We are delighted to join a company that shares our commitment to innovation, sustainability and superior service.”Dato' Lee Yeow Chor, Chief Executive Officer of IOI:
“Together, we will be a leader in innovation with global applications capabilities, making us the supplier of choice to our customers. I also expect Loders employees to benefit as they become part of a larger, global organization.”
“We look forward to working with the Bunge team to maximize the opportunities that this transaction creates."
"From our discussions with Bunge about a potential partnership, we can see that Loders will benefit greatly from Bunge's global asset footprint and expertise in seed oils sourcing and seed oil-based product offerings.”
“IOI is excited about the opportunity to participate in the future growth of the combined Bunge and Loders business and to realize our shared ambition of forming a formidable global specialty edible oils player."
Strategic and Financial Benefits
- Creates Comprehensive Product Offering with Enhanced Solutions for Customers:
The transaction combines Bunge's vertically integrated upstream capabilities and existing oils portfolio, predominately based on seed oils, with Loders' high-end specialty and semi-specialty products from tropical oils, including palm, coconut and shea.
It enables Bunge to provide a comprehensive customer offering, from core products to specialties, for B2B customers in the food processing, industrial and artisanal bakery, confectionery, human nutrition and food service segments. - Combines Leading Innovation and Application Capabilities Worldwide:
Loders is a recognized solutions provider with a substantial intellectual property portfolio of over 300 patents, with technical centers in Malaysia, the Netherlands and the United States.
The combination will build upon these capabilities and continue developing a wide range of applications to meet customer and consumer needs. - Significantly Accelerates Growth of Value-Added Oils Business:
In addition to strengthening Bunge's Food & Ingredients business with a broader portfolio of value-added products, the transaction diversifies Bunge's manufacturing and R&D network across core geographies. This includes establishing a stronger presence in fast-growing Southeast Asia. Bunge's Food & Ingredients revenues in that region will be four times as large as they are today.
Bunge will also have an enhanced footprint in Europe and North America. After closing, Loders will have exposure to new markets where Bunge has a strong presence, including Latin America and India. - Immediately Accretive to Cash Earnings:
It is expected that Loders will generate $105 million of EBITDA in 2018 on a stand-alone basis, plus the transaction is expected to result in $15 million in cost synergies in year one. In year three, cost synergies are expected to total $45 million and revenue synergies are expected to be $35 million for a total of $80 million annually. Based on an enterprise value ("EV") of $1.35 billion, the EV to 2018 EBITDA multiple is 12.9x, or 7.3x 2018 EBITDA when factoring in run-rate synergies.
The transaction is expected to be accretive to earnings on a cash basis in the first 12 months post-closing, and by approximately 5% on a GAAP basis and approximately 7% on a cash basis by the end of year three. Cash accretion differs from the GAAP calculation by excluding $27 million of step-up amortization.2
The expected $45 million of cost synergies will primarily result from optimizing the combined production network and supply chain, procurement and general and administrative efficiencies. The $35 million of revenue synergies are expected from cross-selling, global account development and providing a differentiated customer offering. See "Non-GAAP Financial Measures" elsewhere in this press release for more information. - Builds on Clear Commitments to Sustainability:
Bunge and Loders are committed to sustainable sourcing, including zero-deforestation, zero peat conversion, protection of human rights, traceability and transparency.
This transaction will combine leading policies, people, programs and partnerships from both companies.
Bunge intends to continue its work as a member of The Forest Trust, increasing the sustainability of its supply chain and collaborating in projects that help advance industry performance. Following the close of the transaction, Bunge intends to base its palm oil sourcing on Loders' policy.
Transaction Details and Financing
Upon completion of the transaction, Bunge will have a 70% controlling ownership interest in Loders. IOI will retain a 30% ownership interest and customary protective rights. As part of the transaction, for a period of five years after closing, Bunge will have the right to purchase the remaining interest in Loders from IOI, and IOI will have the right to sell its interest to Bunge.
The combined business will establish a five-member board of directors consisting of three Bunge representatives and two IOI representatives. As a major supplier of palm oil to the combined business, IOI will be a valued business partner of Bunge.
Loders will retain its brand and operate as part of Bunge's Food & Ingredients business with key management team members expected to remain with the combined business.
Bunge has entered into a $900 million, unsecured, delayed draw, three-year term loan agreement with Sumitomo Mitsui Banking Corporation, which may be used to finance the acquisition. The terms of this loan are similar to those of Bunge's existing credit facilities. The balance may be funded with cash on hand or borrowings under existing credit facilities. Bunge expects to maintain its investment grade credit rating.
Approvals and Closing Timeline
The transaction has been unanimously approved by the Boards of Directors of both Bunge and IOI. The transaction is expected to close in the next 12 months, subject to customary closing conditions, including receipt of required regulatory approvals and the approval of a majority of IOI shareholders.
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