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By Karl Plume and Rod Nickel
CHICAGO (Reuters) -Bunge's planned acquisition of Viterra would make the world's biggest oilseed crusher even more dominant and secure a larger role in the expanding renewable diesel industry, although it may face competition hurdles.
Under the deal to create an agricultural giant worth about $34 billion including debt, Bunge's crushing capacity will increase by nearly one-third, to 75 million metric tons annually, adding plants in Europe, Canada and Argentina.
The deal would make the combined company better able to capitalize on an anticipated surge in demand for soybean and canola oil to produce biofuels in coming years than its rivals, but more consolidation in the industry leaves farmers with fewer buyers for their crops.
Though its grain trading business is smaller than rivals Cargill and ADM, U.S.-based Bunge is already the world's largest oilseed processor and producer of vegetable oil. Oils produced primarily from soy and canola are seeing increasing demand from refiners for low-carbon renewable diesel.
"This really accelerates the strategic growth platform that we've laid out," Bunge CEO Greg Heckman said in an interview on Tuesday.
Bunge has in the past two years entered partnerships with oil major Chevron to crush oilseeds for renewable diesel and seedmaker Corteva to tailor crops for biofuel feedstocks. Its investment in startup Covercress gives Bunge access to future supplies of a new low-carbon-intensity oilseed for crushing.
"(Buying Viterra) allows us to fill in some of the areas where we needed additional origination, where we needed to be closer to the farmer to drive regenerative ag and sustainable practices," Heckman said.
Viterra's large network of grain shipping terminals and country elevators, particularly in oilseed production regions of North America, Argentina and Europe, would complement Bunge's existing oilseed processing business, analysts said.
In the United States, the deal marks a reversal after Bunge sold 35 grain elevators in 2021, citing poor profits. Viterra's elevators have better locations across Bunge's network, Heckman said.
The Viterra network would aid Bunge's processing plants by both purchasing oilseeds from farmers and shipping products like livestock meal, analysts said.
"Scale is key in this business and the more points along the value chain you possess, the more opportunity you have," said Ben Bienvenu, equity research analyst at Stephens.
"Bunge (stock) was a way to express a bullish view on the renewable diesel buildout via equity prior to this deal. And it's only more so post this deal," he said.