Morningstar | Bunge Announces Leadership Transition; Strategic Review Likely To Yield Portfolio Changes. See Updated Analyst Note from 10 Dec 2018
On Dec. 10, Bunge announced that current CEO Soren Schroder will step down. Bunge's board of directors has formed a search committee to find the company's next CEO. and Schroder will remain CEO until a successor is named, although there was no stated timeline for the transition. Further, Bunge announced that Kathleen Hyle, currently a board member, will become board chair effective immediately. Former board chair L. Patrick Lupo will remain on the board of directors.The leadership changes are the first step for Bunge, as the company is currently in a state of transition since activist shareholders gained four board seats earlier this year. The board plans to conduct a strategic review to determine the future of the company. We note that a range of outcomes is possible and with no concrete announcements, we maintain our $74 per share fair value estimate for no-moat Bunge. At current prices, shares remain undervalued.
The company's strategic review will explore a variety of options. The company is currently composed of four businesses--grain merchandising, food and ingredients, sugar, and fertilizer. The grain merchandising business, known as the Agribusiness segment, could be separated from the Food & Ingredients business to create two focused businesses. Additionally, the two smaller, noncore businesses, sugar and fertilizer, could be divested. The strategic review could also include transformative acquisitions to grow the Agribusiness or Food & Ingredients businesses.
We also note that one possible outcome from the strategic review is a sale of the full company to a competitor such as Glencore or ADM. Both competitors had approached Bunge about acquiring the firm over the last couple of years, but outgoing CEO Schroder has been resistant to the overtures, having won board support for continuing to operate independently. However, activist shareholders would, of course, be open to selling Bunge if an attractive bid emerged.
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