Corn Products May Shuck Its Deal

The $4.2-billion June agreement with Bunge Ltd. may be yet another victim of plunging values.
Stephen TaubNovember 5, 2008

The financial markets continue to lead companies to abandon mergers, as well as other kinds of deals. The latest example was a big one: Corn Products International announcing today that its board intends to withdraw its recommendation in favor of being acquired by Bunge Ltd. — a deal originally valued at $4.2 billion.

Corn Products said that the board may change its recommendation after at least five days notice to Bunge.

Under the original merger agreement, a Corn Products withdrawal or change in recommendation gives Bunge the right to require that Corn Products hold a stockholder meeting to vote on the adoption of the merger agreement, or terminate it and seek reimbursement from Corn Products for up to $10 million of Bunge’s expenses.

Corn Products did not provide further information or explanations for the change in sentiment about the deal.

“We are disappointed by the Corn Products Board’s decision,” said Alberto Weisser, Bunge’s chairman and CEO. “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.”

Bunge added that it expects to announce its next step promptly.

Bunge proposed the deal in June, when commodity prices were surging. The value of the offer has shriveled by two-thirds in recent months, however.

Were the deal to fall apart, it would hardly be alone. Globally, 142 deals were withdrawn in October, the most of any month on record, according to efinancialnews.com, citing data from Dealogic. This rise in in withdrawn deals grew 13 percent from the previous high of 125 — in the prior month.

Meanwhile, CVR Energy Tuesday withdrew its registration with the Securities and Exchange Commission to offer $125 million in convertible senior notes, citing the falling price of crude oil. The refiner said in a regulatory filing it may undertake a subsequent private offering of securities. When the offering was filed on June 19, the price of crude was more than $130 per barrel, according to the Associated Press. The current price of crude is roughly half that.