“The announcement is very consistent with Glencore’s well-telegraphed intentions to expand in the agribusiness space through acquisitions,” Moskow said. “Bunge issued a release denying that it has engaged in discussions with Glencore and reinforcing its commitment to executing its strategy, but it did not reject Glencore outright.”
In his analysis, Moskow said he expects Soren Schroder, chief executive officer of Bunge, to join with Bunge’s board of directors to engage with Glencore.
“From our perspective, CEO Schroder has made the right moves strategically to turn Bunge into a higher-ROIC business with a strong global footprint and value-added capabilities,” he said. “However, the glut of grain supplies in the global markets and the persistent problem of slow farmer selling have frustrated its plans year after year. CEO Schroder himself said that the industry needs to consolidate in order to improve returns. Combining with Glencore sounds like a logical way to do it.”
Moskow said Credit Suisse believes that a potential transaction could have an enterprise value of $15.5 billion and an equity value of $90 to $95 per share.
As to the likelihood of another bidder stepping in, Moskow was less sure, saying only that it’s possible.
“Not sure how to put a probability on it,” he said. “But given the declining margins across the industry, it would make sense to assume that other parties might consider stepping in (maybe Dreyfus?). Or a Chinese national might consider making a bid to accelerate the country’s growing presence in Brazilian origination. ADM probably would face anti-trust concerns in the U.S.”
While an ADM acquisition of Bunge probably would face anti-trust concerns in the United States, Moskow said he sees minimal anti-trust concerns in a potential takeover by Glencore.
“These two businesses appear complementary, particularly from a geographic viewpoint, with Glencore's Ag j.v. possessing a strong presence in Canada and Australia while Bunge’s business activities are concentrated in U.S., South America and also Asia — geographies where Glencore Ag j.v. lacks scale,” he said. “We see overlap in South America and Europe that may give rise to cost synergies from any merger and/or sales of assets.”
