DealZone

The market has increasing doubts on Bunge Ltd’s $4.4 billion plan to buy Corn Products International Inc for $4.4 billion to gain a leading position in corn-based starches and sweeteners.

The spread on the deal is currently 144.8 percent, with both stocks down from the merger announcement in June, according to Reuters data. Agriculture and fertilizer stocks have plummeted along with the broader market amid a global credit crisis that has investors worried that economic growth will slow and demand for raw materials will fall.

“This tells us that either: 1) investors feel uncertain at best that the proposed acquisition will go through, or 2) Bunge will increase its offer price. We think that Bunge is unlikely to raise its offer and that the most logical read-through … is that the market doesn’t believe this deal is going to happen,” Citi analyst David Driscoll said in a research report.

Citi cut its investment-risk rating on Corn Products to “hold/speculative,” from “hold/medium risk,” citing the recent volatility in the stock and the uncertainty around the pending deal with oilseed processor and fertilizer producer Bunge.

Driscoll said he believes Corn Products is worth more than its current trading price, citing its record third-quarter earnings and higher full-year guidance. The stock ”would likely rapidly appreciate from current levels upon dissolution of the acquisition agreement.”

Bunge, meanwhile, last week said its quarterly profit fell 33 percent as foreign exchange losses and tough market conditions offset a sharp rise in sales. Bunge said it believes its problems — such as weak corn and soybean prices and farmers’ limited access to loans in some regions — are temporary.