US agribusiness giant Archer Daniels Midland Co. (ADM) has made a takeover approach to Bunge Ltd. (BG), WSJ and Reuters reported. The proposal likely set up a possible bidding war after Glencore earlier made an overture to the agricultural powerhouse.
Archer Daniels Midland Co. (ADM), American global food processing and commodities trading Corporation, has proposed a takeover of Bunge Ltd , according to a person familiar with the approach told Reuters. The proposal could set up a bidding war with Swiss-based rival commodity giant Glencore Plc. Details of the ADM approach are unclear but The Wall Street Journal report said it was possible that neither Glencore nor ADM would succeed in getting Bunge into their fold.Bunge had a market value of about $9.8 billion and ADM’s valuation was $22.6 billion. New York-based Bunge operates in more than 40 countries, while Chicago-based ADM is operating in 160 countries.
Large grain traders that make money by buying, selling, storing and shipping crops have struggled in recent years with global oversupplies. Thin margins have squeezed core commodity trading operations, including those of ADM, Bunge, Cargill Inc. and Louis Dreyfus Co. which together are known as the “ABCDs” and dominate the industry. “Consolidation is seen as one remedy. Glencore last year sought a tie-up with Bunge in what was viewed as a start of a wave of mergers and acquisitions in the industry.” Reuters stated. Bunge, which rebuffed an acquisition offer from Glencore last year, might not follow up on ADM’s proposal, the source told the news agency. “A standstill agreement prevents Glencore from making a new offer until next month, and Bunge is keeping its options open for now”, the source added.
ADM is the most U.S.-focused of the major grain companies and a takeover would help it grow in South America, where Bunge is a major agricultural force. The biggest overlap between ADM and Bunge in the United States is in grain origination and oilseeds processing. The companies would probably need to divest facilities in North America and also possibly in Europe.
Any tie-up would probably face stiff scrutiny from regulators and opposition from farmers who fear handing more market control to ADM could hurt wheat, corn and soybean prices. Erik Gordon, a professor at the University of Michigan’s Ross School of Business told Reuters, “An ADM-Bunge merger would also face opposition from farmer groups in key agricultural markets, including the United States, European Union, China, India and Brazil.”