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Archer-Daniels-Midland Co. (ADM)

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ADM makes bid for Bunge, Glencore seen lying in wait

22 Jan 18

LONDON (ShareCast) - (ShareCast News) - US grain merchant Archer Daniels Midland (ADM) has proposed a takeover of New York-based agribusiness Bunge, a move that could potentially set off a bidding war with rival Glencore.
However, a standstill agreement prevented Glencore from being able to make another offer until February.

Furthermore, Bunge, which had already rejected an acquisition offer from Glencore in 2017, could potentially rebuff ADM's proposal, according to a source close to the matter.

ADM refused to comment on "rumours or speculation", and Bunge did not responded to requests for comment.

In recent years, grain companies had expanded into higher-margin sectors, such as food ingredients and aquaculture, in an attempt offset the softer results and massive swings seen from their traditional crop handling activities.

Fair value for Bunge was estimated to be between $90 to $95 per share, but some had predicted the company's price tag could exceed $100.

As well, any tie-up between the two would likely face scrutiny from regulators, as well as opposition from farmers that fear giving further market control to ADM could hurt wheat, corn and soybean prices.

Analysts at Credit Suisse had already run a Glencore-Bunge merger scenario model on 6 December, finding that as the year had progressed, Glencore had continued to grow in financial strength and share price, but potential agricultural targets remained in a cycle low.

A previous analysis had yielded EPS accretion of between 7-8% EPS and determined that a deal was possible within Glencore's $16bn net debt ceiling, especially as the outfit's debt continued to fall through 2018.

In the Swiss broker's opinion, Glencore would most likely bide its time, waiting for the potential regulatory hurdles to an ADM-Bunge combination to manifest themselves before reacting.

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Market Data

Currency US Dollars
52 Week High $46.35
52 Week Low $36.76
Shares Issued 560.09m
Market Cap $25,271m


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