The joint venture
Bunge (BG) is attempting to incorporate its business and expand its footprint in Asia via a joint venture with Wilmar International.
In a press release on July 5, 2016, the company announced that it would be selling 45% of its stake in its Vietnam crush operations to Wilmar. Terms of the transaction were not disclosed.
This deal is a part of Bunge’s strategy to enhance the global presence of its Oilseeds Processing segment. This segment is a part of its Agribusiness segment, which draws 70%–73% of total revenue for the company along with ~80% of its total segment operating profit each year.
Bunge also operates through its four other segments: Edible Oil Products, Milling Products, Sugar and Bioenergy, and Fertilizer. To know more about Bunge’s key strategies as discussed in its annual general meeting, you can read Will Bunge Continue Its 2016 Rally?
About the deal
This deal is a planned alliance between three well-positioned players in the Vietnamese oil and feed markets. Bunge and Wilmar will hold 45% each in this joint venture, and Quang Dung will hold 10%. Quang Dung is a major soybean meal distributor in Vietnam and a majority owner of Green Feed, a growing Vietnamese feed milling business.
A major competitor for Bunge in this segment is Archer Daniels Midland (ADM), which has a similar business in its Oilseeds Processing segment. ADM’s segment earned $25.2 million in revenue and $1.6 million in operating profit in its last reported quarter. Cargill, another of Bunge’s peers, is a privately held agricultural product company in the United States.
Bunge’s peers in Europe include Louis Dreyfus Group and Glencore International (GLEN). Wilmar International and China National Cereals and Oils and Foodstuffs are among Bunge’s peers in Asia.
To gain exposure to Bunge, you can invest in the VanEck Vectors Agribusiness ETF (MOO) and the First Trust Consumer Staples AlphaDEX ETF (FXG), which invest 3.0% and 3.7%, respectively, in Bunge. Bunge also forms 1% of the First Trust Large Cap Value Opportunities AlphaDEX ETF (FTA).
What’s in this series?
Next, we’ll see how Bunge is on track with expanding its Oilseeds business globally. Later, we’ll talk about Bunge’s stock performance and Wall Street’s recommendations for the stock.