UPDATE 6-Bunge to buy Corn Products for $4.4 billion

Mon Jun 23, 2008 3:04pm EDT

(Adds comments from interview with Bunge CEO; changes dateline to CHICAGO from NEW YORK)

CHICAGO, June 23 (Reuters) - Fertilizer producer and oilseed processor Bunge Ltd said on Monday it would buy Corn Products International Inc CPO.N for $4.4 billion to gain a leading position in corn-based starches and sweeteners.

The deal comes at a time of record grain prices and will give Bunge, a dominant player in South America, a stronger position in North America as it supplies some of the largest U.S. food and beverage companies such as Coca-Cola Co (KO.N) and Kellogg Co (K.N).

The deal 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, the No. 3 player in global agribusiness by revenue behind Cargill Inc [CARG.UL] and Archer Daniels Midland Co (ADM.N), expects the transaction to lead to annual savings of $100 million to $120 million.

"Our first take is that this is a good deal for both companies," Citibank analyst David Driscoll said in a note to investors. "Corn Products gets a substantial premium to its prior closing price ... and Bunge uses its very strong stock as its currency to do the deal."

Shares of Corn Products, headquartered in the Chicago suburb of Westchester, Illinois, jumped as much as 28 percent to $54.96, while Bunge, based in White Plains, New York, fell 11 percent to $109.

"It's part of our strategy to expand into complementary value chains," Bunge Chief Executive Alberto Weisser told Reuters. "We started a tentative alliance in Brazil, selling Bunge products through Corn Products and corn products through Bunge. It's working extremely well."

The acquisition should add to earnings by 2010 or late 2009, Weisser said on a conference call.

Separately, Bunge raised its 2008 earnings forecast range by more than $2 a share, driven by strong demand for fertilizer and continued strength in oilseed processing margins.

HIGHER CORN PRICES

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.

Corn prices in the United States have topped $7 per bushel this month, about double the levels of a year ago, as flooding in the Midwest has wiped out wide swathes of agricultural production.

The deal is valued at $4.8 billion, including about $414 million of Corn Products' net debt. The diluted shares total 77.8 million, including money options and other equity awards that will be settled in Bunge shares at closing.

Stockholders of Corn Products, which has leading market shares in South America, Mexico, Canada and Pakistan, will own about 21 percent of Bunge once the deal closes.

The combined company will 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.

Bunge said it now expected 2008 earnings per share of $9.35 to $9.65, up from a prior outlook of $7.10 to $7.40. This does not reflect the acquisition, which the company expects to close in the fourth quarter.

Analysts had been 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 had $44.8 billion in net sales last year and has more than 25,000 employees in 30 countries. Corn Products had $3.39 billion in 2007 net sales and has 34 plants in 15 countries.

After the proposed deal, Bunge will have 32,000 employees in 40 countries.

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 in New York and Lisa Shumaker in Chicago; Editing by Quentin Bryar, Sue Thomas and Steve Orlofsky)

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