by Dinesh Nair, Manuel Baigorri and Javier Blas
Archer-Daniels-Midland Co.’s in advanced talks to acquire commodity trader Bunge Ltd., a deal that could spell the end for a company independent for two centuries and reorder the financial environment that enables farming across the globe.
ADM and Bunge, which has a market value of about $11.5 billion, could reach an agreement as early as this week, people familiar with the deal said, asking not to be identified because the deliberations are private. The takeover talks could still fall apart, while other bidders could still be interested in acquiring Bunge, the people said. ADM is scheduled to announce full-year earnings Tuesday.
Bunge is the B in the so-called ABCD companies that dominate global agricultural trade, alongside ADM, Cargill Inc. and Louis Dreyfus Co. Founded to broker grain trades in Amsterdam in 1818, it’s now headquartered in White Plains, New York, and supplies ingredients and expertise in the Americas, Eastern Europe and Asia. But its profits have plunged after years of bumper crops, prompting industry executives to talk of consolidation.
The potential takeover matters 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.
ADM and Bunge each oversee some of the largest networks of U.S. grain infrastructure such as silos that thousands of farmers rely on to get their crops to market. A potential merger would likely be scrutinized closely by regulators, just like Bayer AG’s pending acquisition of Monsanto Co. to create the world’s largest supplier of seeds and crop chemicals. It’s also likely to attract attention from politicians across the bread-basket states of the Midwest.
“This is a big deal, arguably, for consumers because it controls the flow of production from the farm to the products on grocery store shelves," Chad Hart, a professor of agricultural economics at Iowa State University in Ames, said in a telephone interview Monday. “It’s a continuing sign that agriculture is trying to readjust to a tighter margin environment."
A deal involving Bunge would likely give the ABCD grain merchants the biggest shake-up in a generation. For almost two decades, the industry has seen consolidation among mid-size players, but the top firms have remained little changed since Cargill merged with the trading unit of Continental in 1999 and ADM took over most of the assets of Andre & Cie, which at the time of its bankruptcy in 2001 was among the world’s top grain traders.
And the move may also trigger a bidding war: 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 ADM with a cash offer.
"The great ABCD reshuffling has just started," said Jean-Francois Lambert, a consultant and former head of commodity trade finance at HSBC Holdings Plc.
Bunge shares rose 5% to $82.51 at 2:14 p.m. in New York while ADM was 0.7% higher at $41.71. ADM, Bunge and Glencore declined to comment.
An ADM 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. The National Farmers Union, commenting on initial reports of ADM’s interest in Bunge in January, said it opposed further consolidation in the agriculture industry.
ADM, 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.
Bunge has struggled over the last 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.
--With assistance from Mario Parker.
To contact the editors responsible for this story: Will Kennedy at [email protected]
Stephen Merelman, Simon Casey
© 2018 Bloomberg L.P