BG Bunge Global SA

Archer Daniels Midland Company (ADM) announced the successful remarketing in two parts of $1.75 billion of notes originally issued as a component of its equity units in June 2008. The $70 million notes in the first part carry a coupon rate of 4.479% and are due to mature on March 1, 2021. The $1 billion of notes in the second part carry a coupon rate of 5.765% and are scheduled to mature on March 1, 2041.

In June 2008, the company had issued $1.75 billion of debentures as a component of equity units. Equity units are a combination of debt and forward purchase contract for the holder to purchase the company’s common stock.  

The debentures were slated to be remarketed in 2011. Each purchase contract obligated the holder to purchase from the company, no later than June 1, 2011, for a price of $50 in cash, a certain number of shares, ranging from 1.0453 shares to 1.2544 shares, of the company’s common stock, based on a formula established in the contract.

The remarketing is scheduled to close on April 4, 2011, pursuant to customary closing conditions. The remarketing is being carried out on behalf of equity unit holders and Archer Daniels will not initially receive any of the proceeds.

The proceeds will instead be utilized toward the purchase of U.S. Treasury securities that will be pledged to secure the stock purchase obligations of the holders of the equity units. The U.S. Treasury securities will be held by Archer Daniels’ collateral agent, The Bank of New York Mellon Corporation (BK).

On June 1, 2011, Archer Daniels will receive approximately $1.75 billion from its collateral agent and then issue shares under the forward stock purchase contracts. This will mark the completion of the company’s equity obligations under the original equity units. The issuance proceeds will be utilized towards general corporate purposes, including paying back short-term debt.

As a result of the issuance, Archer Daniels’ number of outstanding shares will increase by approximately 44 million and will dilute its fourth quarter and fiscal 2011 earnings. The Zacks Consensus Estimate for Archer Daniels is currently pegged at 89 cents for the fourth quarter and $3.36 for fiscal 2011.

Based in Decatur, Illinois, Archer Daniels Midland Company procures, transports, stores, processes and merchandises agricultural commodities and products in the United States and internationally. 

In the United States, Archer Daniels operates 191 elevators with an aggregate storage capacity of more than 420 million bushels. It competes with Bunge Ltd. (BG) and Corn Products International Inc. (CPO). We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.

 
ARCHER DANIELS (ADM): Free Stock Analysis Report
 
BUNGE LTD (BG): Free Stock Analysis Report
 
BANK OF NY MELL (BK): Free Stock Analysis Report
 
CORN PROD INTL (CPO): Free Stock Analysis Report
 
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