ADM Has Made Takeover Approach to Bunge Ltd.
January 19 2018 - 4:39PM
Dow Jones News
By Dana Mattioli and Jacob Bunge
Archer Daniels Midland Co. has made a takeover approach to Bunge
Ltd., according to people familiar with the matter, setting up a
possible bidding war after Glencore PLC earlier made an overture to
the agricultural powerhouse.
Details of the ADM approach are unclear and it's possible
neither company would succeed in buying Bunge, which had a market
value of about $9.8 billion as of Friday afternoon. ADM's valuation
was $22.6 billion.
Mining conglomerate Glencore approached White Plains, N.Y.-based
Bunge, which ranks among the world's largest traders and processors
of crops like soybeans and corn, The Wall Street Journal reported
in May. The two companies have a standstill arrangement that
temporarily prevents Glencore from making a hostile bid for Bunge.
It's unclear whether the expression of interest from ADM negates
the standstill, which expires in coming weeks, and enables Glencore
to make another move now.
Glencore has been widely expected to re-engage with Bunge once
the standstill expires though it's unclear what its intentions are
at present.
ADM and Bunge represent the "A" and "B" in the so-called ABCDs,
the global commodity-trading companies that dominate the world-wide
flow of basic foodstuffs. Minnesota-based Cargill Inc. and Louis
Dreyfus Commodities, headquartered in the Netherlands, are the
other two.
A deal with Bunge would represent a strategic shift for
Chicago-based ADM, which competes with Bunge in the business of
buying, selling and processing crops. While ADM maintains one of
the world's largest agricultural trading networks, the company in
recent years has prioritized investing in food ingredients and
flavorings, which executives tout as more profitable and more
stable than the sometimes-volatile grain industry.
A combination between ADM and Bunge would likely face stiff
regulatory hurdles, given the companies' competing grain
facilities, shipping terminals and processing plants.
Glencore's agricultural division has a smaller presence than
ADM's and Bunge's in key crop-exporting bread baskets like the U.S.
and Brazil, so a Glencore deal could face fewer such hurdles.
A deal could fortify the companies at a time when agricultural
traders are struggling. A string of bumper crops in North America,
South America and Eastern Europe have swelled stockpiles and pushed
down agricultural commodity prices.
Ample supplies mean fewer and smaller price swings, making it
harder for grain companies to make profitable trades. Low prices
have also left farmers reluctant to sell crops to grain companies,
with many instead choosing to stash away crops on their own farms
and wait for prices to improve. And food companies that buy raw or
semi-processed grain from commodity firms are placing fewer
long-term orders, since prices are expected to remain low.
Bunge shares have given back their sharp gain after the Journal
reported on Glencore's approach, as a result of poor earnings.
Bunge traces its roots to a Dutch firm founded in 1818. Its
controlling families, the Bunges and Borns, moved the company to
South America and eventually the U.S. The company went public in
2001 and rode a commodity boom that ran from 2007 to 2013.
ADM's history dates back to 1902, when Daniels Linseed Co. was
founded in Minneapolis to process linseed oil. The company later
changed its name to Archer Daniels Midland before listing shares on
the New York Stock Exchange in 1924, later expanding into grain
trading and crop processing in Europe and South America. The
company runs about 500 crop-buying facilities and 250 processing
plants around the world.
--David Benoit contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com and Jacob Bunge
at jacob.bunge@wsj.com
(END) Dow Jones Newswires
January 19, 2018 16:24 ET (21:24 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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