In the agricultural sector, it's been nirvana for investors. But are prices too high?
Perhaps not. Take Bunge Ltd. (NYSE: BG), which is a major fertilizer and oilseed producer. Bunge has agreed to pay $4.4 billion for Corn Products International Inc. (NYSE: CPO), a producer of finished corn products. Some of its customers include biggies like Coca-Cola (NYSE: KO). This is a stock-for-stock deal. In other words, why not take advantage of the high market caps?
Both companies have rich histories. Corn Products got its start in 1906 and Bunge was founded in 1818. But it's the future that matters, and Bunge is certainly bullish on the global growth trends in the agricultural markets. To take advantage of this, it makes sense to bulk up. Corn Products will expand Bunge's offerings as well as provide some diversification.
In fact, Bunge also raised its full-year 2008 earnings forecast from $7.10-$7.40 to $9.35-$9.65. This doesn't even include the impact of the Corn Products transaction.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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