Archer Daniels Midland Co. is in advanced talks to acquire commodity trader Bunge Ltd., accelerating the pace of consolidation in the global grain-trading industry, according to people familiar with the matter.
Archer Daniels Midland and Bunge, which has a market value of about $11.5 billion, could reach an agreement as early as this week, the people said, asking not to be identified because the deliberations are private. The takeover talks are ongoing and could still fall apart, while other bidders could still be interested in acquiring Bunge, the people said. Archer Daniels Midland is to announce full-year earnings today.
Bunge is the B in the so-called ABCD companies that dominate global agricultural trade, alongside Archer Daniels Midland, Cargill Inc. and Louis Dreyfus Co. After several years of bumper crops, trading profits have fallen, prompting industry executives to talk of consolidation.
The potential Archer Daniels Midland-Bunge deal may trigger a bidding war as Glencore PLC made an approach last year to Bunge about a merger with its own agriculture unit. While Glencore, which is partnering with Canadian pension funds, rarely gets involved in competitive takeover battles, the commodity trader, led by Ivan Glasenberg, could try to trump Archer Daniels Midland with a cash offer.
The takeover would also matter well beyond the tightly-knit world of agricultural traders. The companies buy crops across the planet -- from soybean growers in Brazil to wheat farmers in Ukraine -- and supply the world's largest food companies such as Nestle SA and Kraft Heinz Co. A merger of two giants of American agriculture will also attract the attention of politicians across the bread-basket states of the Midwest.
An Archer Daniels Midland merger with Bunge would probably face significant antitrust hurdles in the U.S. and perhaps in Brazil and China. To satisfy regulators, a deal would likely require the divestment of assets, such as silos and processing plants in North America, certain to attract interest from competitors.
Archer Daniels Midland, which has a market value of about $23 billion, made a preliminary approach to Bunge in recent months, a person familiar with the matter said in January.
Archer Daniels Midland's approach came after Glencore raised the idea of a merger with Bunge last year. The Swiss-based company was rebuffed and signed a standstill agreement that prevents it making a hostile bid for the time being.
Bunge, based in the outskirts of New York, has struggled over the past year and a half. It cut profit guidance several times as large surpluses of wheat, corn and soybeans reduced trading opportunities. Soren Schroder, Bunge's chief executive officer, said in July that clear overcapacity in the industry meant there was a need for consolidation.
Business on 02/06/2018