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  • By Lynda Kiernan-Stone, Global AgInvesting Media

Bunge Expands Value-Added Oils Business with $946M Acquisition

Bunge Ltd. announced it has agreed to acquire a 70 percent majority stake in IOI Loders Croklaan (Loders) - a manufacturer of palm and tropical oil products - from IOI Corporation Berhad (IOI) for $946 million.

The deal falls under Bunge’s strategic plan to invest in businesses with higher margins and comes nearly two months after the company announced it was cutting costs and undertaking a restructuring of its global business. Four years of worldwide bumper grain crops, massive stockpiles, and low commodity prices have taken their toll on the four ABCD grain trading giants - Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus - driving each to respond by both streamlining and diversifying their businesses to include higher-value units such as flavorings and ingredients.

This deal, which will combine Bunge’s vertically integrated upstream capabilities and oils portfolio with Loders’ high-end specialty and semi-specialty palm, coconut, and shea oil products, will expand Bunge’s value-added capabilities, reach, and scale across core geographies, and is expected to make the company a leading player in the $33 billion semi-specialty and specialty B2B oils market and in categories including confectionery, baking, and infant nutrition.

The deal also will see Bunge strengthen its presence in the European and North American markets, but more significantly, in the Southeast Asian market - a region where Bunge states the acquisition will lift its Food & Ingredients revenues to be four times what they are today.

“This is a compelling transaction for Bunge,” said Soren Schroder, CEO, Bunge. “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.”

Meanwhile, for Loders, which has an IP portfolio of more than 300 patents and seven plants across Europe, North America, and Asia, the tie-in with Bunge will provide it with access to a greater global footprint and expertise in seed oil sourcing and oil-based product lines.

"We are delighted to join a company that shares our commitment to innovation, sustainability and superior service," said Julian Veitch, chief executive officer of Loders "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."

On a stand-alone basis, Loders is expected to generate $105 million of EBITDA in 2018, while the deal is also expected to generate $15 million in cost synergies in the first year. By the third year, cost synergies are expected to top $45 million and revenue synergies are expected to reach $35 million, for a total $80 million in synergies per year. The $45 million in cost synergies will primarily result from the combining of production networks and supply chains, and procurement and administrative efficiencies.

After closing, which is expected to happen within the next 12 months, IOI will retain a 30 percent stake in Loders, however, Bunge will have the right to purchase the remaining interest in Loders for a period of five years. The combined business will establish a five-member Board of Directors, with three seats representing Bunge and two representing IOI. Loders will retain its brand and will operate as part of Bunge’s Food & Ingredients business with key management team members staying in place to run the combined business.

“After the transaction, IOI will still play an important role in Loders given our expertise in palm oil sourcing and our business experience in the fast-growing Asia Pacific Region,” said IOI CEO Dato’ Lee Yeow Chor. “IOI will have two representatives on Loders’ five-member Board of Directors and our representatives will also be involved in key management decisions taken by Loders. IOI will continue to be a major supplier of palm oil and palm products to Loders after the transaction. In this respect, IOI will maintain our strong sustainability commitments as spelled out in IOI Group’s Sustainable Palm Oil Policy.”

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