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Bunge (BG; Baa1/BBB+ Pos/BBB+ CW Pos) Moody's Upgrade

CONSUMER STAPLES

The global agri producer has had a 1-notch upgrade to Baa1 Stable from Moody's.

  • It was on review (as it is with Fitch) after announcing merger with {VT CN Equity} - most of it (75%) funded by stock with $2b in cash. Additional $2b buyback was also committed to ease pain of dilution for equity holders ($1b done).
  • It will take on $8b in debt from Viterra (against RMI inventory position though) - Moody's has that moving net leverage from 1.1x to 2.5x - that is in line with mgmt target for 2.5x.
  • Moody's sees benefits of scale nearly doubling it to $114b in sales and putting it above competitor - Archer-Daniels (ADM; A2/A, $90b sales). It also expects significant operational synergies.
  • EU gave it conditional approval late yesterday. Close was initially expected at the middle of this year (looks to be running over).

Yet to see supply, Moody's has assumed full $2b to fund the cash component - which looks pro-forma in line with mgmt BS targets.

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