ADM in Takeover Move on Bunge -- WSJ

Overture could touch off bidding war with Glencore, which has also signaled interest

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 (January 20, 2018).

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 is 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.

Bunge shares were up 11% at 4 p.m. Friday after The Wall Street Journal reported the approach.

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 Journal reported in May. The two companies have a standstill arrangement that temporarily prevents Glencore from making a hostile bid for Bunge. It is 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 expected to re-engage with Bunge once the standstill expires, though it is 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, with its headquarters 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.

An ADM-Bunge combination 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 semiprocessed 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 [email protected] and Jacob Bunge at [email protected]