Bunge to acquire 70 percent stake in IOI Loders Croklaan for US$945m
13 Sep 2017 --- Bunge plans to strengthen its edible oil presence with a US$946 million deal to acquire a 70 percent controlling ownership interest in IOI Loders Croklaan Corporation which will retain a 30 percent ownership interest. The global agribusiness and food company has entered into a definitive agreement to acquire the majority ownership interest in IOI Loders Croklaan from IOI Corporation Berhad, comprising €297 million (US$356 million) and US$595 million in cash.
It's usual key business is buying grains and oilseeds from farmers and shipping them around the world, as well as being an international soybean exporter. However, many producers have been holding onto grain recently because of low price pressure on the market.
The US$946m palm oil deal closely follows Unilever resuming sourcing palm oil from the IOI Group following big improvements in the company’s policy. Unilever had stopped sourcing from the IOI Group amid a major controversy in Indonesia regarding issues that included deforestation, palm oil practices and child labor.
At the end of August, Unilever said it would resume sourcing but warned it would be closely monitoring progress to make sure sourcing practices stay on track.
Getting in on edible oil
According to Bunge, the transaction expands its “value-added capabilities, reach and scale across core geographies” to establish itself as a global leader in business-to-business oil solutions.
Following the completion of the transaction, which is subject to the usual regulatory approvals, together, Bunge and IOI Loders Croklaan will have a differentiated, comprehensive product offering that reflects both seed and tropical oils, and world-class formulation and application capabilities.
“We will form a truly global food Ingredients company with a sustainable and traceable supply chain, positioning us well to help our customers distinguish their consumer offerings,” says an IOI Group statement.
“We are excited about the benefits this combination will create for our customers, employees and shareholders of both our companies.”
According to IOI Group, those benefits include creating a comprehensive product offering and accelerated a shift towards higher value-added products with new specialty edible oils solutions.
It says how the transaction combines Bunge’s existing edible oils portfolio, predominantly based on seed oils, with IOI Loders Croklaan’s specialty products from tropical feedstock (such as palm, coconut and shea).
Bunge’s and IOI Loders Croklaan’s portfolios, combined, result in a comprehensive offering, from bulk to specialties, for B2B customers in industrial food processing, industrial and artisanal bakery, confectionery, food service and infant nutrition.
The IOI Group also says how the partnership will diversify IOI Loders Croklaan’s manufacturing and R&D network across core geographies like North America, Europe, Asia, and provide exposure to new markets including Latin America, Africa and India.
In addition, it will provide a world-class innovation platform with premier formulation and application capabilities. IOI Loders Croklaan is a recognized solutions provider with a substantial intellectual property portfolio. The intent is to preserve and build these capabilities and facilities, as well as IOI Loders Croklaan’s heritage of innovation, and continue developing IOI Loders Croklaan’s key applications in bakery, confectionery and human nutrition.
The deal will also maintain IOI Loders Croklaan’s strong sustainability commitments, as both companies are committed to sustainable sourcing, including zero-deforestation, zero peat conversion, human rights protections, traceability and transparency.
“This transaction will facilitate the sharing of best-practices and expand engagement with third party organizations. Both companies are committed to increasing the traceability of their supply chains and collaborating in projects that help advance sustainability across the palm oil industry,” stresses the IOI Group in its statement.
“This is a compelling transaction for Bunge. It delivers on our stated objective to expand our value-added business by accelerating our growth in B2B semi-specialty and specialty oils,” says Soren Schroder, Bunge’s CEO.
“Together with IOI Loders Croklaan, we will have a comprehensive product offering derived from seed and tropical oils, with leading innovation, application capabilities and sustainability programs. This complete seed and tropical oil portfolio will position Bunge to be a full-service partner and uniquely able to help our customers innovate and grow for the future. We are excited about the benefits that this combination will create for Bunge’s shareholders, as well as for the employees, customers and business partners of our companies.”
“The key capabilities that the talented employees of IOI Loders Croklaan bring in customer intimacy, market knowledge and application development will be a competitive advantage for the combined business.”
Bunge and IOI Loders Croklaan say they are fully aligned with the priorities.
“From our discussions with Bunge about a potential partnership, we can see that IOI Loders Croklaan will benefit greatly from Bunge’s global asset footprint and expertise in seed oils sourcing and seed oil-based product offerings,” says Dato’ Lee Yeow Chor, Chief Executive Officer of IOI Loders Croklaan.
“IOI is excited about the opportunity to participate in the future growth of the combined Bunge and IOI Loders Croklaan business and to realize our shared ambition of forming a formidable global specialty edible oils player.”
Transaction details
As part of the transaction, for a period of five years after closing, Bunge will have the right to purchase the remaining interest in IOI Loders Croklaan from the IOI Group, and IOI Loders Croklaan will have the right to sell its interest to Bunge.
The combined business will establish a five-member Board of Directors consisting of three Bunge representatives and two IOI Group representatives. As a major supplier of palm oil to the combined business, the IOI Group will be a valued business partner of Bunge.
IOI Loders Croklaan will retain its brand and operate as part of Bunge’s Food & Ingredients business with key management team members expected to remain with the combined business.
By Gaynor Selby
