Vale Deal Shadow Over Bunge (BG, VALE)
January 21, 2010 12:16 PM
Analysts at Morgan Stanley have rated Bunge Inc. (NYSE: BG) as Equal-Weight while rating the Agricultural products sector as Attractive.
Bunge has recently disclosed that it is in talks with Vale (ADR) (NYSE: VALE) for a potential deal which could lead to the transfer of its fertilizer mining assets – including a controlling stake in Fosfertil. Vale officials have gone on record stating that they would not be willing to pay more than $3.8 billion.
Morgan Stanley believes that this figure substantially undervalues the assets in question. Morgan Stanley estimates that these assets ought to be valued at $4.4 billion at least – 16% more than the maximum Vale intends to pay. Moreover, this valuation may be conservative considering the fact that phosphate margins have been on an upswing in recent weeks.
Thus, if the deal goes through - keeping in mind Vale’s terms - would be grossly loaded against Bunge shareholders.
