Glencore Must Bide Its Time in Overtures to Bunge -- WSJ
October 14 2017 - 3:02AM
Dow Jones News
By Dana Mattioli, Scott Patterson and Jacob Bunge
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 14, 2017).
Glencore PLC has a standstill agreement that temporarily
prevents it from making a hostile bid for Bunge Ltd., according to
people familiar with the matter, raising the possibility Glencore
will renew its effort to acquire the grain trader.
Glencore in May confirmed it had approached Bunge about a
takeover that would expand the Swiss commodity trader's reach in
global agricultural markets at a time when low crop prices have
forced farming concerns to seek scale through mergers. Glencore
said at the time that discussions might or might not ensue.
Since then, investors have sought clues as to whether Glencore
and its deal-hungry chief executive, Ivan Glasenberg, would follow
through on the approach, but the companies have said little in
public. Given Bunge's current market value, a deal for the company
would likely carry a price tag well over $10 billion.
Glencore and Bunge had originally been exploring a smaller deal,
a person familiar with the matter said this week. In order to gain
access to confidential information, Glencore agreed to the
standstill and then sounded out Bunge on the idea of a full
takeover. The standstill, which expires early next year, for now
prevents Glencore from buying stock in Bunge or from making any
public, unsolicited approach.
The existence of the agreement -- previously unreported --
raises the possibility Glencore is biding its time before making
another approach, though it is unclear what, if any, its plans may
be.
In August, an analyst asked Mr. Glasenberg on a conference call
if Glencore would only pursue an agricultural deal on friendly
terms. "Would we go friendly or hostile? I suppose we cannot really
comment on that," Mr. Glasenberg said.
A deal with Bunge would bring Glencore one of the most expansive
networks of grain-shipping and processing facilities in North and
South America. It would represent a long-term bet on demand for
crop trading with the global population expected to hit 9.8 billion
by 2050, according to the United Nations.
Bunge, based in White Plains, N.Y., had a market value of about
$9.5 billion Friday morning before The Wall Street Journal reported
on the standstill agreement. The shares rose 6.8% to close at
$72.49 on the news.
The company, which traces its roots to a Dutch firm founded in
1818, went public in 2001 and expanded on the back of a commodity
boom between 2007 and 2013.
Bunge is among the world's biggest dealers in basic foodstuffs
such as soybeans, corn and wheat. Alongside rivals like Cargill
Inc., Archer Daniels Midland Co. and Louis Dreyfus Co., Bunge buys
crops from farmers and grain elevators, sells them to food
companies and livestock operations, and processes them into
products like vegetable oil and flour.
In May, The Wall Street Journal reported that Glencore had
approached Bunge about combining. Glencore later confirmed that its
agriculture unit "made an informal approach to Bunge...regarding a
possible consensual business combination."
Bunge's quarterly profits subsequently declined and its shares
sank. After surging nearly 20% on news of the possible deal, the
shares have given back all the gain and then some.
Bunge and other grain traders have struggled against low crop
prices that have left farmers reluctant to sell their crops -- a
factor Bunge officials in August said contributed to a 33% drop in
second-quarter profit. Agricultural-commodity prices generally have
lingered at low levels due to a succession of bumper harvests
beginning in 2013.
Rising grain stockpiles also have eased concerns over potential
supply shocks, leaving agricultural markets less volatile. That
makes it harder for companies like Bunge to profit through
trading.
Write to Dana Mattioli at dana.mattioli@wsj.com, Scott Patterson
at scott.patterson@wsj.com and Jacob Bunge at
jacob.bunge@wsj.com
(END) Dow Jones Newswires
October 14, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Bunge Global (NYSE:BG)
Historical Stock Chart
From Aug 2024 to Sep 2024
Bunge Global (NYSE:BG)
Historical Stock Chart
From Sep 2023 to Sep 2024