Bunge

All-stock deals to make a return?

Jim Kim — Tue, 24 Jun 2008 21:41:52 -0400

We speculated a while back that all-stock deals may make a return. The idea is that financed deals will be difficult in this environment. Still, some companies with strong stocks have put themselves in a good position for acquisitions. As if on cue, Bunge has agreed to buy Corn Products International in an all-stock deal worth $4.4 billion. But Breakingviews.com notes that the market reacted skeptically, as the deal looks "slightly value destructive for shareholders." The article also points out that the deal could create up to $840 million in "cost cuts and incremental profits" annually, less than the premium paid. Finally, the article talks about a paper composed by academics Baruch Lev and Feng Gu that concluded that "stock-for-stock acquisitions tend to destroy value." Mr. Market may be onto something, which just could limit these deals going forward.

For more:
- here's the Breakingviews.com article

Goldman Sachs, Morgan Stanley lead in commodities

Thu, 22 May 2008 06:59:58 -0400

We noted recently that hedging commodities poses big risks for traditional hedgers, ag companies, airlines, energy companies and the like. Big farm corporation Bunge stands as a cautionary tale. There is indeed a fine line between hedgers and speculators at times. But for the Wall Street dealers, soaring commodity prices and the need for companies to hedge has created a nice revenue stream, notes the Globe and Mail. Goldman Sachs and Morgan Stanley lead the pack, each enjoying a more than 40 percent market share in OTC commodity derivatives (Greenwich Associates). Barclays Capital and JP Morgan also are major players. The most sophisticated hedgers: BP, Exxon Mobil, Lufthansa, Royal Dutch Shell and Southwest Airlines, the survey found.

For more:
- here's the Globe and Mail item

Double-edged sword: Rising commodities prices

Wed, 14 May 2008 06:59:54 -0400

We tend to think of big farm-type companies as hedgers, who take the other side of bets waged by hedge funds. But when you get down to this, there's a fine line between corporate hedgers and raw speculators. There are plenty of corporate treasury employees who have been burned by currency "hedges" that went bad and cost the company a lot in earnings. Same goes for airlines hedging against energy prices. Fortune notes that ag firms are as dependent on the capital markets as ever. It takes a look at Bunge, which is borrowing more than ever and suffering big losses on hedges for soybeans and other crops. This story may not have a happy ending.

For more:
- here's the Fortune article