Glencore on May 23 issued a statement indicating it had made an informal approach to Bunge regarding a “possible consensual business combination.” But for its part, Bunge has denied it’s engaged in business combination talks with Glencore.
“MT Newswire reports that Bunge has hired bankers to develop a defense plan, but we find it hard to believe that the company would walk away from a compelling offer,” Robert Moskow, research analyst with Credit Suisse, wrote in the June 7 report. “To get to our target price we put a 50% probability on the chances of the stock getting to $98/share through a Glencore take-out and a 50% probability on the stock getting to $82/share in 12 months, with Bunge remaining independent. We arrive at $82/share for Bunge as a stand-alone entity because we believe the company would adopt a more aggressive strategy to create value if it remained independent.”
“CEO Schroder himself said that the industry needs to consolidate in order to improve returns,” he said. “Combining with Glencore sounds like a logical way to do it.”
Moskow said one way Bunge may be able to create value as a stand-alone entity would be to exit its non-core sugar business and focus its resources on expanding its higher return agribusiness and food products divisions.
“By our math, a sugar sale would be modestly dilutive if the business sold for $1.5 billion,” he said.
