Farms.com Editors
Swiss based company, Glencore PLC has informally approached Bunge Ltd. about combining in a deal that would give the Swiss miner a major presence in the U.S. agriculture market at a time when low grain prices have triggered a number of mergers.
Glencore said its agriculture unit "made an informal approach to Bunge...regarding a possible consensual business combination." Discussions may or may not take place and there is no certainty there will be a deal, Glencore said. The Wall Street Journal earlier reported news of the approach, which Glencore confirmed with its statement.
Bunge shares jumped 17% on the news and closed at $81.70 and the company has a market capitalization early Tuesday of nearly $10 billion. Including debt, its so-called enterprise value was about $15 billion.
Glencore is a commodity-trading enterprise with a market value of $55 billion. The acquisition of Bunge, one of the world's largest traders and processors of soybeans and corn, would position Glencore as a major player in agriculture's global grain trade and give it a major presence in the U.S.
Bunge's operations in the U.S. and Brazil would provide Glencore a major presence in the two largest soybean-producing countries -- and the respective No. 1 and No. 3 in corn, according to U.S. Agriculture Department. Investing in agriculture would help diversify Glencore's business and may help it weather the price swings that make mining a notoriously volatile business.
With $42.9 billion in sales last year, Bunge is among the biggest of the grain-trading companies that manage the flow of grain between farmers to food plants and livestock operations. Bunge's recent strategy has been to strike joint ventures and partnerships with smaller companies to run mills and processing plants more profitably.
Glencore's agriculture business posted $22 billion in revenue in 2016, compared with $66.3 billion for its metals and mining operations. It is already one of the world's biggest marketers of wheat, feed barley, canola and sunflower products and is a major exporter from Russia, the European Union, Canada and Australia, though it has little presence in the U.S. It has about 14,000 employees world-wide, with 274 storage and handling facilities in 17 countries.