Filed by Bunge Limited
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to
Rule 14a-12
under the Securities Exchange
Act of 1934
Subject Company: Corn Products
International, Inc.
Commission File No.: 001-13397
FORWARD-LOOKING STATEMENTS
This material contains forward-looking statements,
including, among other statements, statements regarding the proposed merger
between Bunge and Corn Products, and the anticipated consequences and benefits
of the transaction. Statements made in
the future tense, and words such as anticipate, expect, project,
continue, believe, plan, estimate, intend, will, may and similar
expressions are intended to identify forward-looking statements. These statements are based on current
expectations, but are subject to certain risks and uncertainties, many of which
are difficult to predict and are beyond the control of Bunge and Corn
Products. Relevant risks and
uncertainties include those referenced in Bunges and Corn Products filings
with the Securities and Exchange Commission (the SEC) which can be obtained
as described in Additional Information below.
Risks and uncertainties relating to the proposed merger include: required regulatory approvals may not be
obtained in a timely manner, if at all; the proposed merger may not be
consummated; the anticipated benefits of the proposed merger, including
synergies, may not be realized; and the integration of Corn Products
operations with those of Bunge may be materially delayed or will be more costly
or difficult than expected. These risks
and uncertainties could cause actual results to differ materially from those
expressed in or implied by the forward-looking statements, and therefore should
be carefully considered. Bunge assumes
no obligation to update any forward-looking statements as a result of new
information or future events or developments.
ADDITIONAL INFORMATION
This material is not a substitute for the joint
proxy statement/prospectus and any other documents Bunge and Corn Products
intend to file with the SEC in connection with the proposed merger.
Investors and
securityholders are urged to carefully read the joint proxy
statement/prospectus regarding the proposed merger when it becomes available,
because it will contain important information.
The joint proxy statement/prospectus will be,
and other documents filed or to be filed by Bunge and Corn Products with the
SEC are or will be, available free of charge at the SECs web site
(www.sec.gov), by accessing Bunges website at www.bunge.com under the tab
About Bunge and then under the heading Investor Information and from Bunge
by directing a request to Bunge Limited, 50 Main Street, White Plains, New York
10606, Attention: Investor Relations, and by accessing Corn Products website
at www.cornproducts.com under the tab Investors and then under the heading
Financial Reports and then under the heading SEC Filings and from Corn
Products by directing a request to Corn Products International, Inc., 5
Westbrook Corporate Center, Westchester, Illinois 60154, Attention: Investor
Relations.
Neither
Bunge nor Corn Products is currently engaged in a solicitation of proxies from
the securityholders of Bunge or Corn Products in connection with the proposed
merger. If a proxy solicitation
commences, Bunge, Corn Products and their respective directors, executive
officers and other employees may be deemed to be participants in such
solicitation. Information about Bunges
directors and executive officers is available in Bunges proxy statement, dated
April 16, 2008, for its 2008 annual meeting of shareholders and in Bunges
most recent filing on Form 10-K.
Information about Corn Products directors and executive officers is
available in Corn Products proxy statement, dated April 4, 2008, for its
2008 annual meeting of stockholders and in Corn Products most recent filing on
Form 10-K. Additional information
about the interests of potential participants will be included in the joint
proxy statement/prospectus when it becomes available.
Event
ID: 1882805
Culture: en-US
Event
Name: Bunge Limited and Corn Products to Combine Conference Call
Event
Date: 2008-06-23T12:30:00 UTC
******************************************************
Notes:
Converted
From Text Transcript
1882805
BUNGE
LIMITED Conference Call
June 23, 2008
C:
|
Mark Haden; Bunge Ltd.; Director - IR
|
C:
|
Alberto
Weisser; Bunge Ltd.; Chairman, CEO
|
C:
|
Sam
Scott; Corn Products International; Chairman, President, CEO
|
C:
|
Jackie
Fouse; Bunge Ltd.; CFO
|
P:
|
Vincent
Andrews; Morgan Stanley; Analyst
|
P:
|
Ken
Zaslow; BMO Capital Markets; Analyst
|
P:
|
David
Driscoll; Citigroup; Analyst
|
P:
|
Christine
McCracken; Cleveland Research; Analyst
|
P:
|
Christina McGlone; Deutsche Bank; Analyst
|
P:
|
Robert
Moskow; Credit Suisse; Analyst
|
+++
presentation
Operator:
Good day ladies and gentlemen, and welcome to the Bunge Limited Conference
Call. My name is Francis, and Ill be your coordinator for today. At this time
all participants are in listen-only mode. We will conduct a question-answer
session towards the end of this conference.
(OPERATOR
INSTRUCTIONS)
As
a reminder, this conference is being recorded for replay purposes. I would now
like to turn the call over to Mr. Mark Haden. Please proceed.
Mark
Haden: Thank you, Francis. Good morning. Before we get started, I wanted to
inform those of you who may not have seen it in the press release this morning
that we have prepared a slide presentation to accompany todays discussion. It
can be found in the Investor Information section of our website, bunge.com, as
well as Corn Products website, cornproducts.com.
Id
like to direct you to Slide Two and remind you that todays presentation
includes forward-looking statements that reflect Bunges and Corn Products
current views with respect to future events, financial performance and industry
conditions. These forward-looking statements are subject to various risks and
uncertainties.
Bunge
and Corn Products have provided additional information in their reports on file
with the SEC concerning factors that could cause actual results to differ
materially from those contained in this presentation and encourages you to
review these factors.
Participating
on the call today are Alberto Weisser, Chairman and CEO of Bunge, Sam Scott,
Chairman, President and CEO of Corn Products, and Jackie Fouse, CFO of Bunge. Ill
now turn the call over to Alberto.
Alberto
Weisser: Good morning everyone, and thank you for joining us on short notice.
As you saw in this mornings press release, we are excited to announce that we
have signed a definite agreement to combine with Corn Products, a leading
player in the corn value chain.
Before
Sam and I discuss the transaction, I want to briefly touch on our other
announcement this morning in which we increased our 2008 full-year earnings
guidance from $7.10 to $7.40 per share to $9.35 to $9.65 per share. This
increase is attributed to better than expected performance in Bunges
Agribusiness and Fertilizer segments.
In
terms of markets, customer has been firm despite higher commodity prices.
Oilseed processing margins in general are strong around the world, and high
international fertilizer prices are benefiting margins in our Fertilizer
business.
However,
in addition to opportunities, todays volatile, high price environment create
challenges for participants throughout the food production chain, in our role
as a physical link between farmers and customers, prudent management of working
capital and risk will continue to be essential in the coming months. With that
backdrop, lets discuss the highly compelling combination of Bunge and Corn
Products. Let me start with a quick overview of the transaction terms and
structure, which you can find on slide four.
It
is an all stock, tax-free acquisition under which Corn Products shareholders
will receive a fraction of Bunge common share equal to $56 in value subject to
adjustments. The calculation to reach the exact number of Bunges shares that
Corn Products stockholders will receive is described in detail at the end of the
presentation. This purchase price represents approximately a 30% premium to the
closing price of Corn Products shares on Friday of $42.90 and approximately a
25% premium to the 20-day average trading price of $44.90.
The
aggregate transaction value is $4.8 billion, including assumption of
approximately $414 million of Corn Products net debt. We expect the closing of
the transaction to occur in the fourth quarter of 2008 subject to customary
approvals and closing conditions.
Now,
let me speak to the rationale and vision behind this transaction. An important
part of Bunges global strategy is to grow by expanding our business into
complementary value chains, value chains in which we can utilize our existing
operations to drive additional growth and generate greater value. We have done
this in grains and recently in sugar.
By
establishing Bunge as an integrated global player in corn, the combination with
the Corn Products is the next logical step. It makes us a leading participant
in an attractive growth business and creates new opportunity through
integration with our other operations to generate greater value from our core
businesses.
We
see several distinct benefits. First, this transaction will benefit our
customers. Adding Corn Products value chain to our business will allow us to
offer customers a broader portfolio of products including sweeteners, starch
and value-added ingredients, and we will be able to serve customers better
through integrated distribution channels and by linking our product development
functions.
Second,
it expands our geographic scope. Corn Products has a strong and strategic
global network of operations. Combining our operations will give us improved
balance and provide opportunities to expand in places where we have a small or
no presence today.
Third,
by combining our operations, we will be able to generate incremental profit and
cost savings through improved supply chains, risk management and
customer-facing activities. Lastly, the all-stock transaction strengthens the
balance sheet and will help support the future growth of the larger business.
We
have pursued growth through both organic investment and strategic acquisitions.
In fact, Bunge has a history of pursuing acquisition that provides strong
platforms for continued growth and expansion. In the past decade, we have done
both large and small transactions that have increased our scale, improved our
geographic balance and broadened our product portfolio.
Our
track record in integrating these companies is solid. We believe this will be
no different. We will dive into each one of these areas in greater detail in a
moment. But before that, let me introduce Sam who will tell you a bit more
about Corn Products and the areas in which it operates. Sam?
Sam
Scott: Thank you Alberto, and good morning. Let me start by saying Im very
pleased to speak with you today. Without question, we believe this is the right
step for Corn Products, for our investors, our customers and our employees. Weve
known Alberto and his team for many years and admire their company, their
products and their global presence. We believe they will make an ideal partner,
and were looking forward to working with them.
For
those of you who dont know us as well as you know Bunge, let me tell you a
little about Corn Products and why we think this transaction makes sense. From
an economic point of view, our recent financial results attest, Corn Products
has solid fundamentals with strong sales growth, balance sheet and cash flow.
We expect our 2003 to 2008 earnings per share compounded annual growth rate to
be between 22% and 24% based on our guidance for 2008.
Corn
Products is a leading global corn refiner and supplier of higher-valued
ingredients and industrial products. We have a broad range of products
including sweeteners, starches and co-products. Our customer base is also
broad. Our products are sold in 70 countries to over 60 industries within the
food and industrial sector. Our revenues are divided across a variety of
segments with processed foods and soft drinks making up about 20% each and
brewers and animal feed each comprising about 10%.
There
are quite a number of areas and customers that we share with Bunge, presenting
a terrific opportunity to grow our business by serving as a stronger, single-source
provider. As Alberto mentioned, with 34 plants in 15 countries, we have a wide
global footprint with leading positions in numerous key growth geographies.
We
have a leading share of capacity in South America, Mexico, Canada and Pakistan,
and were a top-tier producer in South Korea and Thailand. In addition, were
the only North American corn refiner with a full-scale starch and sweetener
facilities in all three countries. As Alberto said, adding our company to Bunge
makes a strong, strategic sense especially given the enhanced ability to
leverage the future potential of the corn value chain.
We
have a promising outlook for growth in our core markets. The global starch and
sweetener markets are growing at approximately 5% per year. Rising per capita
income, desire for improved diets and enhanced technology and innovative
products applications will all combine to growth in corn products. These trends
are the same that drive demand for Bunges products.
In
short, were excited to be partnering with a team we know and respect, and the
fit couldnt be better. Were delivering current value to our shareholders with
participation in a larger, more diverse company, and our people are energized
and motivated. And with that, Ill turn the call back over to Alberto.
Alberto
Weisser: Thanks, Sam. Lets now drill down on some of the points that Sam just
referenced. As the map in our presentation shows, in terms of global footprint,
upon closing the company, the combined company will have approximately 32,000
employees in 40 countries.
Both
companies will benefit. Together, we will have a strengthened presence in North
and South America, which will improve our ability to serve customers in these
important regions. And importantly, we will be able to utilize each others
operations to expand in new geographies. Bunge will gain the advantage of Corn
Products large presence in Mexico and in other parts of South America as well
as its operations in Africa and Asia.
By
capitalizing on Bunges global footprint, Corn Products will have the
opportunity to expand in India and sell products to Europe. Both companies will
benefit in China where Bunge will provide Corn Products access to the food
industry, and Corn Products provides a broader product portfolio.
Slide
eight, which is a simplified view of our operations shows how corn wet milling
fits into our business. By integrating the corn value chain into Bunges
operations, we will be better able to create incremental value. We can apply
Bunges strength in supply chain and risk management to Corn Products
operations while at the same time we can build upon Corn Products capabilities
in product innovation.
Shared
distribution provides additional value. In fact, we already have a partnership
in Brazil supplying the bakery industry that has proved highly successful. Of
course, expanding our operations into new products and geographies can provide
additional opportunities to build our overall business by capitalizing on new
trade flows and by managing logistics and risk well.
We
will see the same type of diversification in strengthening our product
portfolio. Corn Products brings us strength in value-added products and special
ingredients such as glucose, liquid dextrose, crystalline dextrose, polyols and
fermentation products. These products have strong global growth prospects, as
Sam mentioned earlier, and the technologies in these businesses can be migrated
to expand our potential activities in biofuels and other areas.
Theres
meaningful overlap in some segments, namely in the food processor, brewing,
bakery and animal feed markets. In some instances, Bunge and Corn Products
supply the same customers and we believe this transaction will enable us to
serve them better.
Turning
to Slide 11, both sets of shareholders will benefit from their stake in the
larger-scale, first-year agribusiness and food company. We anticipate annual
cost savings and incremental profit opportunities to be in the range of $100
million to $120 million.
Importantly,
we plan to recognize cost synergies without any plant closures as a result of
this transaction. We see this combination creating a larger company with more
opportunities for that entire enterprise and our employees, and this
transaction will have a positive impact on our balance sheet, which will
support future growth.
We
have a track record of integrating assets that make strategic sense for our
company. This includes assets that have established or enhanced our leading
position in key value chains, products and regions. Corn Products represents
our largest acquisition to date and will have a significant strategic impact on
our business.
Finally,
you can see some additional detail on the terms of the transaction. Before we
open the line for questions, I just want to reiterate that we are very excited
about the opportunities presented by this transaction. Corn Products is a clear
leader in growing businesses and will undoubtedly make tremendous contribution
to the Bunge organization. Operator, we will now be happy to take questions.
+++
q-and-a
Operator:
(OPERATOR INSTRUCTIONS). And your first question is from the line of Vincent
Andrews. Please proceed.
Vincent
Andrews: Good morning everyone, and congratulations.
Alberto
Weisser: Good morning, Vincent.
Vincent
Andrews: A few questions here, I guess why not start with the guidance just to
get that out of the way. Based on our estimates, Im not surprised that youve
raised the numbers to this level, but youve been very conservative with
guidance to date. Is it fair to say that all the same caveats that youve been
giving us all year in relation to the farmer and fertilizer prices and so forth
apply to this new guidance as well?
Alberto
Weisser: Its a little bit different now because we are already in the middle
of the year, so we have much more visibility about what South American crop was
and how the planting is of the new one, the selling of farmers the selling of
fertilizer to farmers.
I
think we have a little bit more knowledge about how things are going, but obviously
there are always opportunities and risks out there. We felt it was important to
come out with the guidance at this time because of the transaction, so it is
always our best estimate, the most realistic estimate of how the year will be.
Vincent
Andrews: Okay, and Mark, is that you?
Mark
Haden: Yes.
Vincent
Andrews: Oh, okay. Could you is there any sort of split that you could give
between Fertilizer and Agribusiness in terms of the guidance raise?
Alberto
Weisser: The way we see this Vincent is, theres a little bit more of the some
of the incremental the guidance, or the increase, theres a little bit more
in Fertilizer, but Agribusiness is also very strong.
Vincent
Andrews: Okay. Okay. And then just moving onto the deal, Alberto, why now?
Obviously, there are lots of great attributes of Corn Products, but some of
those the majority of them were also true two or three years ago when the
stock was at a much lower valuation or share price.
Alberto
Weisser: The we have been always interested in working together. In fact, we
have talked already probably nine, 10 years ago and from time to time, but for
different reasons the time was not right. First of all, we were not ready.
You
have to remember, we have had a lot on our plate in the last couple of years
and with growth and expansion opening up new areas, South America, fertilizer,
Europe, Asia, then we had this tough 2005, 2006 years with the difficulties
with farmers and the
agribusiness
sector, so we had this massive improvement in Europe where we had to go through
and closing plants, opening up new ones, theres only so much you can do.
And
I think similarly a little bit is where Corn Products was. They have improved
tremendously their operations, especially in U.S. and in North America but also
have started a program five years ago of expanding into new products.
And
for us, it was important to see that the pipeline of Corn Products was a robust
one, the innovation skills was robust, and we got more and more convinced. So,
that is why I think the timing the stars just got aligned now, so but we
have been we were there was always some interest, and Im sure it was
interest on both sides.
Vincent
Andrews: Okay. Last one, and then Ill pass it along, interesting time to be
making this acquisition with corn well north of $7, and your standalone
business really the price of corn is you dont have too much where youre
trying to pass through a higher price of corn, and thats not going to be the
same now.
How
are you thinking about the high-fructose corn syrup business in the U.S.? And I
know Corn Products is well hedged for 2008, but how did you deal or, how do
you think about that risk on a go-forward basis given where corn prices are?
Sam
Scott: Yes.
Alberto
Weisser: Yes. I will start, and then I will ask Sam to complement. One comment
I would like to do is that this is exactly our business. We all the time, we
are confronted with issues of weather, of prices, volatility, so the beauty of
our business is that every six months, it resets itself because farmers have to
plant. If prices are high, naturally youre going to see expansion in
plantings.
And
so, this is not something unusual for us. We see it all the time, so we are
used to it. And when we look at these kind of transaction, we look at long
term. We have a long-term view. But, I am also comfortable from what we saw,
what in our due diligence and all our analysis, outside analysis, that Corn
Products is well positioned. Sam, would you like to add some?
Sam
Scott: Sure, let me add something. Andrew, as you know, as you said, weve
hedged our business on a regular basis. Over the last few years, weve made the
market aware of the fact that weve gone further in multi-year contracts. Weve
more to grain-related contracts, and something that Ive said right along is
that as the ag complex goes up, we expect to see sugar go up as well. And that
has in fact happened over the last couple of weeks with sugar next year, world
sugar up in the 14.5-plus range for next year whereas it was about $0.10 a few
months back.
So
although it is a very unusual environment, we feel were positioned well for
it. As you know around the rest of our world, outside of the U.S. and Canada
where we have fixed-price businesses, we have leading market positions and in
those positions, our model works well. We were able to pass the incremental
corn cost through. So, were in pretty good shape and as Alberto and I have
talked about it, we were both comfortable with going forward at the present
time.
Vincent
Andrews: All right. Thanks, so much. Ill pass it along.
Alberto
Weisser: Thanks, Vincent.
Operator:
The next question comes from the line of Ken Zaslow. Please proceed.
Ken
Zaslow: Good morning, everyone.
Alberto
Weisser: Good morning, Ken.
Sam
Scott: Ken, how are you doing?
Ken
Zaslow: Pretty good. Alberto, I guess my first question is when you look at
CPO, does this contribute to your growth outlook or to your consistency of
earnings over the next three to five years? How do you see it playing out?
Alberto
Weisser: I see it both. Im impressed with the track record of growth that Corn
Products have shown and the potential that is out there, and its a little bit
different than what we are used. Its much customer-focused. Its much more
innovation, and its a little bit different.
But
at the same time, there are so many overlaps that makes it exciting, so
probably is as much is the growth out there. We really see this
transformational for Bunge as an additional growth platform, so there is a lot
of room for expansion and growth. But also, it by bulking up, by making it a
larger-scale company, it helps also to mitigate some of the volatility thats
inherent in our business.
Ken
Zaslow: So, do you expect to be raising your long-term growth outlook
projections from what you have historically said? And, how long will that take
before we see that?
Alberto
Weisser: I will not say that. I will say first, we have to do the integration.
We have to get very comfortable. Before we would do that, we will need a little
bit of time, Ken.
Ken
Zaslow: But, you do think that it will add incremental growth to your business
model?
Alberto
Weisser: Yes, we will.
Ken
Zaslow: And does this this does not change your CapEx program or anything
like that, does it?
Alberto
Weisser: No, I dont think so. This was very important also for Bunge inside
that when we talked about this that both CapEx programs for both companies have
to continue. That is why we were so excited that we were able to do it on a
stock exchange, on a exchanging-shares basis. And it was very important, our
first priority of both companies was and is to strengthen the core business,
and the second is to add complementary value chains.
So,
it will not change. I think in reality, we have a little bit more space because
of the combined company gives us probably a better credit rating and also all
the ratios are better from a credit-rating point of view, so we have a little
bit more room. I dont think we will change our CapEx program.
Ken
Zaslow: Sam, I have a question for you as well.
Sam
Scott: Okay.
Ken
Zaslow: You know, you kind of look at consensus for 09, you kind of put an
average multiple on you for the history, you know you get roughly about a $53
stock price. Why sell out at $56? Does that give us the idea that maybe
consensus might be wrong on 09 numbers?
Sam
Scott: No, Ken. I wont comment on consensus, as you know, but basically as
Ken
Zaslow: Same math we see.
Sam
Scott: Hmm?
Ken
Zaslow: We you see the same math we see on out there.
Sam
Scott: Right. But basically, Im just not going to comment on where it is, but
Ken
Zaslow: Okay.
Sam
Scott: certainly from the point of view of why now, I think we answered that
before. This is an opportunity to put two very strong companies together and if
you back two or three years ago, perhaps neither was quite as strong or
performing quite as well as we are today.
As
we look at it, as weve talked about it and as Alberto said, weve talked to
each other for a number of years about the possibilities of doing different
things and weve in fact done some ventures in South America now. It was a
compelling argument to do it now, and we thought this was the appropriate time.
Ken
Zaslow: And my last question, Alberto in the press release, you discussed that
you think the cultures are very similar. I kind of would argue it a little
differently than that. Can you give us an idea of why you think the cultures
are very similar?
Alberto
Weisser: Yes. What we really like is the values are very similar, team work,
integrity, openness, trust, very, very similar. The entrepreneurial spirit is
similar. Obviously, its in a different scale and in a different way, but its
very similar, decentralized organization but integrated. These are very very,
very important and in for us, this is the real the tissue that bonds us
together. Now, that would make the integration easier.
Now
where Corn Products will help Bunge, we tend to be a little bit more
commoditized or staple-type of products, and we do need when we think about
the future where the world is evolving, we do need also to have a stronger
focus. We need to have more capabilities in areas to work stronger with the
food-processing industry, food service and even in the retail.
So,
in some areas, the culture is a little bit different, but it is critical in our
industry in an integrated chain to have both capabilities, both the value-added
component, both the commodity, and I think we have seen it in our oil chain
that these two cultures have to work well side by side, and they can only work
well side by side if you have these values and these culture. And there is
where I am very, very comfortable.
Ken
Zaslow: Great. I appreciate it. Thanks, guys.
Sam
Scott: Thank you, Ken.
Operator:
Your next question comes from the line of David Driscoll. Please proceed.
David
Driscoll: Good morning, everyone.
Sam
Scott: Good morning.
Alberto
Weisser: Good morning, Dave.
David
Driscoll: Congratulations, everybody.
Alberto
Weisser: Thank you.
David
Driscoll: This is a big deal. Just a quick comment on the last question there,
Alberto, you said you saw this thing as incremental to growth. Did you just
mean incremental in terms of like technically, itll add net income?
Or
on a percentage basis, it doesnt seem even remotely possible that this is
incremental on a percentage growth basis given that youve been raising
guidance in the magnitude of dollars and $2 every time we seem to get a new
release, which is wonderful but
nonetheless,
it would seem that with $7 corn, kind of big picture here, the growth rate from
the Corn Products assets combined with the growth rate of your assets in these
current environments, it would seem that this is growth dilutive. How would you
respond to that?
Alberto
Weisser: Well, it is a complicated question. We look at the growth rate of Corn
Products. We look at our growth rate. I think we both companies will continue
growing, so I dont know exactly where you are. Probably on percentages, you
might get different percentages, but we think both companies will continue
growing very, very strong. So perhaps the math then is a little bit different
but Jackie, can you help me there?
Jackie
Fouse: Yes. Hi, David. Its Jackie. I think the way to look at it is, we
believe that that the two companies combined in certain product categories and
in certain jurisdictions, well be able to grow and develop in those areas
faster than we would have separately because of being able to leverage the
customer relationships and some of the other things.
So,
there is that aspect to it. I also think that as we start to ramp up the
realization of the synergies, youve got a few years there where until we hit
the run rates on those, there should be incrementality from that once we get
into it and then see it ramp up over 2009, 10, and 11.
So
once we get the deal closed and see exactly how many shares we have to were
giving and what the pro formas look like after weve ironed out the purchase
accounting, well be able to give you a better idea of what we think things are
going to look like for the intermediate term in that regard.
Alberto
Weisser: But for example when I think about Mexico and we are not yet Bunge
is not in a large presence in Mexico, and Corn Products is very strong, or
Colombia or Thailand or Pakistan or other areas. I think we could immediately,
with the help of Corn Products, establish a base, and this will help Bunge grow
more.
Vice
versa is the same. We are starting to see some opportunities of using our very,
very strong network in Europe to start selling products. There is capacity
available. We could start doing these kind of things. And Corn Products has also
is part of a large organization with more resources. There are a couple of opportunities
that they have been looking to expand into that I think well be we will be
able to accelerate.
So,
that is why when I look at it, and coming back to Kens question, I do see
theres some acceleration in growth. Now how this all exactly goes out in EPS
or growth rates and so on, I dont know. We will have to work a little bit
harder. And after the closing, Im sure we could be able to get you a little
bit more color.
David
Driscoll: I look forward to that. A couple of more questions. Does Corn
Products benefit from the Bunge tax rate? Will we actually see the CPO tax rate
go down to the Bunge level?
Jackie
Fouse: Dave, I wouldnt make that assumption simply because when youve got a
company that is, as Corn Products is currently a U.S. headquartered, theres a
lot of things that you have to look at to be able to execute on achieving tax
rate reductions.
We
included in our synergy estimates are some numbers for tax. Were probably
being a little bit careful with those, because we have to concretely look at
exactly how we can integrate all of this into the Bunge structure in that
regard. So we are not assuming that we can take their rate all the way down to
ours.
We
are assuming that we can reduce it somewhat and then well just see where we
get to. But well be able to give you a bit better color on that a little later
in the year as well. But we are assuming some reduction. Its just not down to
where our tax rate is.
David
Driscoll: That goes right to the next question. Whats the timing of the
synergies? And then if you could just give us some ball park break down between
costs and revenue?
Jackie
Fouse: This is pretty rough, okay? But from a cost versus incremental profit
opportunity standpoint, were looking at something like 60/40 or two-thirds,
one third. So theres more on the cost side. And when we talk about the
incremental profit opportunities, were just looking at the business bases that
we have today, not some of the things that Alberto talked about with
potentially being able to get started faster and expand faster in certain
jurisdictions.
In
terms of the realization of those, obviously were going to get on this
immediately in terms of putting an integration plan together and work with Corn
Products in that regard because they know their business better than we do. And
we think we will start to realize those in 2009.
We
wont fully realize them in 2009. We, in our modeling, have planned to have
them fully realized by 2011. If things go well, maybe that can accelerate a
little bit, but weve got it ramping up from 09, 10 and then into 11 to hit
the run rate.
David
Driscoll: Ive got one more for Bunge and then a couple for Sam. So Jackie, one
more question here on the balance sheet. Can, number one actually, do you have
the new credit ratios under the pro forma balance sheet? And then second
question here is do you see the need in the near term for Bunge to raise cash
through an equity offering?
Jackie
Fouse: The answer to the first question is we have run some preliminary credit
metrics based on but those are before weve got the full purchase accounting
ironed out. So theyre based on estimates of what the pro forma financials are
going to look like with some assumptions about the purchase accounting.
So
we know that those credit metrics do improve. We have briefed the rating
agencies on this transaction and we dont have a reaction from them yet. So well
see how that goes.
Ill
be able to give you precise numbers when we get the pro forma financials
produced, but they do improve.
And
to answer your second question, I dont see any need to raise more equity. I
think as weve said in the past, the only reason that we would foresee to do
that is if we have a significant acquisition, like the one that were doing
right now. So thats exactly how youve seen us financing.
David
Driscoll: Okay. Great. Thanks for all the time here. Sam, Ive got a couple of
questions for you.
Sam
Scott: Sure.
David
Driscoll: HFCS in 2009, certainly with $7 corn, this I certainly feel like
the plan to grow earnings in 09 is challenged under a $7 corn environment. Can
you just frame up for us what you see or how you see the business shaping out
in 09? I mean, even if its not numeric, Id still appreciate any comments on
the ability to raise prices in this kind of environment, all the way to
actually not just simply covering the cost of corn, but to seeing profit
improvement?
Sam
Scott: Certainly, Dave. As I mentioned earlier, weve talked on every call
about the price of corn going up and where other commodities would be at that
point in time. And certainly we need to have sugar prices higher in order to be
able to pass through the cost increases. Weve seen sugar in the U.S. go up
substantially over the last couple of weeks.
Were
seeing the same thing happening in Mexico and were seeing world sugar go up,
and its been up quite a bit, as I mentioned in Kens question, so the headroom
is there. Certainly the price of all of the commodities are getting higher and
impacting the food chain, so what that will do on volume still remains to be
seen in this economic environment. But thats only us, thats everybody. And I
think we all are recognizing that were going to have to work our way through
that.
We
still see opportunities for growth in Mexico, with more volume coming on over
time. And as I mentioned, we also have grain related and multi-year contracts
in place in North America that provide for improvement in margin as we go
forward with those businesses. So were looking at it pretty aggressively. We
think we have good opportunity going forward in 09 and thats pretty much
where we are right now.
David
Driscoll: Quick question on international pricing, Sam. This is the one thats
always kind of on a spot basis that you realize the current price of corn
almost immediately. How are you seeing pricing go through those international
ops today?
Sam
Scott: So far, so good. As we mentioned in the last call, we were able to pass
through the $6, I guess it was $6.50 then. Ive not heard any push back from Jorge
or John. Obviously were getting higher in the levels, but the co-products are
also rewarding
us
in most parts of our world. So weve been able to see that go through David and
were comfortable with where we are right now.
David
Driscoll: Final question, any weakness on high fructose volumes because of
softness in the beverage industry? Weve been hearing some comments on this.
Sam
Scott: Were seeing volumes off a little from last year. But not significantly.
Were expecting that with this environment and also with the weather conditions
weve had recently, this is not really unusual. We have weather like this, in
all the years that Ive been here, we see volumes fall down.
Youve
as you said, the soft drink industry is pushing back on the size of cans and
bottles, so as to get people to buy a little bit more and thats having an impact.
But it has not been that significant and were still looking at a pretty good
year.
David
Driscoll: I appreciate all the color here and thanks a lot. Congratulations on
the transaction.
Sam
Scott: Thanks, Dave.
Operator:
Your next question comes from the line of Christine McCracken. Please proceed.
Christine
McCracken: Good morning.
Sam
Scott: Good morning.
Alberto
Weisser: Good morning, Christine.
Christine
McCracken: Just wanted to touch, I guess follow-up, on Daves question relative
to high fructose contracting. Because of the timing, the deal closing, is would
there be any change to either the process of negotiations or and/or how you
handle those corn contracts that you generally lock in at the end of the year?
Sam
Scott: I dont see anything at all, Christine. I think we would follow the same
basic procedures we have in the past. The market will dictate how we contract.
But certainly our intent would be to follow something thats worked fairly well
for us over the last 10 years.
Christine
McCracken: So youre going to youre not going to change your risk management
practices relative to corn?
Sam
Scott: We have not had a chance to spend a lot of time talking about that, but
I think with Albertos interest in our organization and the performance weve
had right now, we will look at and get the best of both worlds, but not change,
necessarily, the hedging policy we have at our business. Our business dictates
that we do what we do.
Christine
McCracken: Great. And then just in terms of, again, kind of the fourth quarter
timing on the deal closing, is that tied to the complexity of all the different
locations that you operate in as a collective company? Or is that really just
kind of the earliest that you can see it all getting done? Is there theres
no antitrust issues at this point?
Jackie
Fouse: Hi, Christine. This is Jackie. Its pretty much about the earliest we
can get it done. I mean, we have to make the usual formal filings. So we also
have to produce the pro forma financials, file that with the SEC, send the
proxies out to the shareholders, the we the transaction has to be approved
by shareholders on, of both companies, so well have to have those meetings to
do that.
And
we dont expect any anti-trust issues. There are some jurisdictions where, just
as a result of their laws, you have to file and just go through the formality
of that process. And then like you asked the size of the deal, requires that.
But so its basically just executing on the formalities.
Christine
McCracken: And then, Alberto, just in terms of obviously Corn Products is
somewhat of a competitor to sugar in South America, wondering does this this
wouldnt change your plans necessarily in terms of expanding into sugar,
sugar-based ethanol in that market, is it?
Alberto
Weisser: No, not really. In fact, it made us even be more interested in it.
Because the sweetener business there is very, very good complementarity. So it
there is an advantage to being in both areas. As we got more and more into
sugar, we saw the need to have a complete package to the customers.
So
sometimes you work more with one, more with the other. So now we have a
complete, thinking it from a customer point of view, we have a complete package
with both raw materials. In fact, Corn Products even works with other raw
materials, with other carbohydrates. So there is an advantage of having being
involved with both.
Thats
from a sweetener point of view. From an ethanol point of view, biofuels, our
philosophy doesnt change. In fact, Corn Products and Bunge have the same
philosophy. First of all, we are a food and agribusiness company. And on corn
and on biodiesel, we are selective investors. Normally only minorities like
Corn Products is as well. And our focus is on ethanol from sugar cane.
Christine
McCracken: Perfect. Just one last question, in terms of management of the corn
wet milling business, are you working to retain several of the hot the Corn
Products, kind of key management personnel? Can you comment on that at all?
Alberto
Weisser: Yes. Very much. We are very, very pleased. We are obviously we know
the team for quite awhile. We think that they are, in style, very similar to
us. They are very competent. And its our utmost interest in keeping them on
board. So we are
working
very hard on that. Because thats part of the interest we have in this, is also
the management capabilities.
Christine
McCracken: Perfect. Congratulations.
Alberto
Weisser: Thank you.
Sam
Scott: Thank you.
Operator:
Your next question comes from the line of Christina McGlone. Please proceed.
Christina
McGlone: Good morning.
Alberto
Weisser: Good morning, Christina.
Christina
McGlone: Alberto, you had listed earlier to Vincents question a bunch of
reasons why you werent ready earlier to do this transaction. And my impression
was that your geographic footprint in kind of grain storage and logistics
wouldnt really match up with CPOs geographic footprint. And I want to know what has changed now. I
know youve grown in grain, in grain distribution logistics and Im curious how
does this footprint stack up now? Is there are you perhaps at a disadvantage
to ADM because of bases being further away from CPOs facilities with your
storage facilities?
Alberto
Weisser: I we feel that from the timing and from the capabilities, it is much
more, when we look at the technology, customer focus, risk management,
logistics capabilities, so the origination, I think, it is relatively
independent. Because some of the sites where Corn Products are, we are not. So
in South America, we might have some advantage.
But
its the whole package. I think Corn Products has done a good job in
originating corns. So the, if I understood your question correctly, it is not
so much driven by origination, but by many of the other components. So in terms
of timing, it was much more were we ready? I think we were not ready before and
I dont think Corn Products was ready before. This is probably the first time
both companies are ready to do something.
Christina
McGlone: Okay. And then expanding on another further question, so in the oil
seeds business, its a very flow-through business and corn is much stickier and
unable to hedge the co-products directly. Im just I want to hear about your
intelligence and your skill set in being able to manage corn versus oil seeds.
Alberto
Weisser: We are looking we are very excited about dealing with the
byproducts, corn gluten, corn oil, all of these will add very, very well to our
capabilities. Like DDGs and all of this. I think this will be very positive.
And I think the hedging of these products sometimes are a little bit different
and sometimes you hedge it with other
commodities.
So I feel very comfortable, our team feels very excited about working together.
Christina
McGlone: Okay. And in terms of the total new business, I know Jackie said you
dont have the pro formas, but the kind of contracted, fixed price business in
North America and Canada. What would that represent in terms of the whole
company, the new companys profits as a percentage?
Jackie
Fouse: Let me see. That is a bit of a tough answer. Its going to be relatively
minor in the grand scheme of things. I mean, its well have to just come
back to you on that, probably when weve sorted some of the numbers out. But
you can do the math on how much share they have in North America, what the
share has been of that of HFCS is then of that and kind of work down the profit
numbers.
Christina
McGlone: But that it seems to me to be less than 5%. So I was just wanted to
get your read on that.
Jackie
Fouse: I think thats right.
Sam
Scott: Let me help you out a little bit.
Jackie
Fouse: I just dont want to get nailed down to one number.
Christina
McGlone: Okay.
Sam
Scott: As you know, we have not given out the share of our fixed price
business.
Christina
McGlone: Yes.
Sam
Scott: As fixed price products. So Jackie, although shes been in the
management presentations, we talked about those things, that information, we
have to decide how were going to go forward with it, whether or not we will or
will not give it out in the future, but as of this moment, that has not been
information weve made public and were not going to do it on this call.
Christina
McGlone: Okay. And Sam, Jorge and John are staying on to the best of your
knowledge?
Sam
Scott: To the best of my knowledge, they have had a chance to meet with Alberto
and his team. They will be part of the integration team and the transition team
and we will be having numerous meetings with the Bunge management over the next
couple of months.
Christina
McGlone: Okay. And just one last question. I wanted to understand the
opportunity in Asia and Alberto, you mentioned China and introducing CPO to the
food
channel.
Can you just give an update on what Chinas stance is in terms of corn used for
various uses in China?
Alberto
Weisser: Sam, would you take that one?
Sam
Scott: Sure. As you know, Christine, the Chinese have stopped exporting corn
and have effectively said they werent going to allow the export of any
corn-based products that would be used or could be used for food applications.
That
has not fully been in effect, but its just were seeing very, very much that
becoming the case. And we also know that China is looking to cultivate land up
in the north, to produce more corn. Over time, they will be
self-sufficient. Right now they pretty
much are self-sufficient as a result of stopping that export. So I think its a
great opportunity for both companies to grow in that country. Certainly from
the Ag sector as well as the production of food and industrial products.
Because
China is not only going to be on the food side, but they have the largest paper
mills in the world, they have the largest textile industry, or will, in the
world and those are all products that Corn Products business will support. And
as the business grows in size, in the Ag space, and in the fertilizer space,
although fertilizer is not there today, there is significant opportunities for
the Bunge business model to work in China.
Christina
McGlone: Okay. Thank you.
Alberto
Weisser: Thank you, Christina.
Operator:
Your next question comes from the line of Robert Moskow. Please proceed.
Robert
Moskow: Hi thanks. Congratulations and just a couple of questions. Alberto, is
this the last acquisition youll make in the corn sweetener space or do you
think theres more consolidation opportunities in the U.S. beyond this one?
Alberto
Weisser: Nice try, Rob. Next question.
Robert
Moskow: Ill move on. But no, but honestly, I mean, is there more room for
consolidation in this industry overall? Whether you do it or somebody else does
it in the U.S.?
Alberto
Weisser: We this was an obviously important consideration to we think about
it and where we what we were convinced is that Corn Products has shown that
it has a track record and has the capability to also grow organically, with a
pipeline of innovation. So that was important.
We
cannot rely our strategy on acquisitions. You need two to tango. So if there
are opportunities, we will look at it, like we do all the time. But they have
to make sense. But if they dont happen, we are fine in growing from the
inside.
Robert
Moskow: Okay. And then you mentioned that this will make you a bigger provider
to, say, a Kellogg thats buying soybean oil and high-fructose corn syrup, for
example. How important is it for a Kellogg to get both of these products from
one supplier? What does it mean for them and why is it a benefit to them? And
maybe you could just give me a little bit more detail on how it creates cost
savings for you?
Alberto
Weisser: What we are seeing is that more and more of the customers they want to
have a supplier with good capabilities, technology capabilities, with a good
offering. So obviously the buyer for oil is a different one than for corn. But
just to give you an idea, when we bought the margarine company in Germany, they
had a market share of 6%. It immediately went up to 10%. So the customers do like to have customers that
have depth both in product lines, in size, in scale. So there is a natural
interest in it. We saw after the acquisition of Cereol, that our capability,
our penetration in the U.S. improved. So we do have received also, obviously,
the feedback from customers that there is some interest in it.
Jackie
Fouse: Rob, this is theres some pretty basic things were even when you
just think about quality levels, they like knowing that theres the same
quality standard levels and with respect to innovation, even if some of the
products in the portfolio are lower on the innovation scale, the customers, if
they feel like theyre going to get more innovation from you over time on the
higher added value products, theyll do the business with you on the lower end
as well. So theres just a lot of things that come together to reinforce that.
Sam
Scott: Rob, one thing weve got a chance to look at is our joint venture in
Brazil, selling to the baking industry by putting the two together was received
very well by the customers for that very reason. We had a larger and broader
product portfolio and customers generally liked that to deal with customers
because they can get more information in a lot of different areas. So its not
only the product, its information and its being able to work with them and be
able to provide them more and more and grow with that customer base.
Robert
Moskow: And as part of that, then, I guess, Jackie, as youre working on the
integration, will you integrate the sales forces of these two companies into
one sales force? Or will you call on them separately for different products.
Jackie
Fouse: I think that weve got to get the deal closed and then sit down with the
commercial people in the two organizations and see what is the best approach
would be. I think that eventually we are going to see some synergy out of being
able to put those the two things together and manage them perhaps somewhat
differently on a go-forward basis. But weve still got to look at all of that
and really see what commercial approach will work best in which jurisdictions
and all that.
Alberto
Weisser: Yes, using the example of Brazil, that Sam mentioned, there was no
change in the sales force. But the products were sold either through one
company or the
other and there was an expansion in the business.
So you start distributing it together, but the sales force would not be
affected. I think, really, you want to
leverage it. Probably this is one where one plus one is three. Although this is
not included in any of our synergy numbers because this is too soft, its too
difficult to measure. So but this over time, we will have a better reading on
that, the opportunities there.
Jackie
Fouse: What might have happened over time was we might have been trying to
build a bit more capability on our side at Bunge that Corn Products already
has, so we wouldnt have to do that.
Sam
Scott: And one of the things that weve done, Rob, at Corn Products for the
last few years, we have strategic plans for our individual customers. And as we
started looking at supplying customers with more products that come as a result
of the Bunge family of products, that strategic plan with be broadened, there
will be a layout of how we address the customer and how we most effectively
supply the customer and that will be a combination of both organizations
thinking it through and then determining how we go after business with that
particular customer.
Robert
Moskow: Okay. Well it, just logically though, it sounds like if youre doing
that and then Bunges doing that on their side, you still have two sales
forces. It sounds like theres room for integration there. But youll figure it
out as you move along I suppose.
Alberto
Weisser: Yes.
Robert
Moskow: Lastly, on stevia, I hope Im pronouncing it correctly.
Alberto
Weisser: Right.
Robert
Moskow: Cargills been giving it a lot of publicity lately. Its been getting a
lot of publicity. Can you give me a sense of what the future is for that
product and what kind of competitive threat it represents?
Sam
Scott: Well, its a naturally based product, high-intensity sweetener, 300 to
400 times as sweet as sugar. We have plants growing in Brazil right now. We
have a capital program allocated to put a facility in Brazil at the moment and
we are doing testing with our customers at the moment. Theres a great deal of interest in it
because it is naturally occurring. Everyone is looking for all-natural,
all-naturally occurring as best they can find it. Its currently in FDA and we
have the patented the plant that we have, which is a higher strain of
rebaudioside A is patented through the Morita patent that we have.
So
I guess, Rob, we see it as being as very, very attractive business because its
one thats servicing the customers needs, but theres a ways from here to get
there, although we have all of the steps laid out right now to moving forward
on the plan.
Robert
Moskow: Okay. Thank you very much.
Alberto
Weisser: Thank you Rob.
Sam
Scott: Youre welcome.
Operator:
Our last question is a follow-up from the line of David Driscoll. Please
proceed.
David
Driscoll: Hi. Great. Thanks for taking the quick follow-up. I think nobody
asked just the basic here, whats the accretion-dilution analysis, Jackie, in 09?
Jackie
Fouse: Based on our expectations of realization of the synergies and assuming
the midpoint of this range on the collar and then theres a few other things
that have to go into the calculation, obviously, we expect the transaction to
be accretive in 2010. 2009 is probably very slightly dilutive.
But
again, were going to know more when we close because of the collar issue and
it could, as soon as we get through that and we have better numbers, well be
able to give you a pretty good answer at that point in time.
Alberto
Weisser: Plus, how well we implement the synergies.
Jackie
Fouse: Yes.
Alberto
Weisser: So this one is a tough one. So our current estimate is 2010 but if we
do better, could 09. Or, if we do worse, it could be a little bit delayed. So
you can bet that were going to work very hard to make it as soon as possible.
David
Driscoll: Alberto, I keep asking you this question on just about every
conference call were on. So its sorry for the repetition here, but your
earnings numbers keep going up like theres just an amazing event. Could you
give us a comment on what you see for 2009? Again, even if youre not specific
on a number, do you actually foresee continued earnings growth in 09 off the
new base you set up this morning?
Alberto
Weisser: It is very difficult to talk about 09. We normally talk about 09 at
the January call but let me tell you, the fundamentals of the industry are
solid and I dont see any reason why, at the moment, to see why they should
change next year.
David
Driscoll: Great. Well I appreciate the comments. Thank you everyone.
Alberto
Weisser: Thank you very much.
Sam
Scott: Thank you.
Operator:
Ill now turn the call back over to Mr. Mark Haden for closing comments.
Mark
Haden: Great, everyone, thank you again for joining us on such short notice and
well talk to you next time.
Operator:
Thank you all for your participation in todays conference. This concludes the
presentation. You may now disconnect and have a good day.
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