5 Nov, 2008 - Bunge Ltd has expressed disappointment over Corn Products International's (CPI) announcement earlier today that it plans to withdraw from the proposed merger between the two companies.
Reports have suggested CPI’s decision to withdraw from the merger came after the value of the all-stock deal fell by over 60% as a result of the financial crisis that has seen share prices slump world-wide.
The deal announced in June was worth US$4.8 billion according to a CPI statement issued at the time. However, the economic turmoil gripping the global markets means its value is now believed to be just under US$2 billion as Bunge share price has fallen – prompting CPI’s rethink.
Bunge said in a statement this afternoon it had no plans to change the terms of the merger announced this summer and continued to believe the alliance would deliver benefits to the company. However, it added it would now evaluate whether to continue with or terminate the deal.
Bunge Chairman and CEO Alberto Weisser said: “Despite the effect of unprecedented turmoil in the equity markets on our companies’ stocks, Bunge’s Board of Directors and management continue to believe a merger with Corn Products as currently structured would deliver significant value over the long-term to shareholders, employees and customers of both organizations.
“Consequently, we have no intention of revising the terms of the transaction. We intend to evaluate carefully, with the best interests of Bunge’s shareholders in mind, our options of either terminating the agreement or proceeding to shareholder votes under the existing agreement.”
If the merger does not go ahead, Bunge could seek US$10 million in compensation from CPI for money it has spent in preparing the deal.
BMO Capital Markets analyst Kenneth B. Zaslow indicated he was uncertain that the merger would now proceed. He said a key factor will be CPI’s progress in finding a new CEO in place of retiring chief Sam Scott.
If the deal were shelved for the foreseeable future, CPI would likely hire a permanent CEO to develop the company’s long-term strategy, said Mr Zaslow. However, if the merger remains a possibility, “no new CEO will take the position, only to sell the company to Bunge and be out of a job”, concluded the analyst.