Glencore Strikes a Standstill Agreement with Bunge

By Dana Mattioli, Scott Patterson and Jacob Bunge Features Dow Jones Newswires

Glencore PLC has a standstill agreement that temporarily prevents it from making a hostile bid for Bunge Ltd., according to people familiar with the matter, raising the possibility Glencore will renew its effort to acquire the grain trader.

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Glencore in May confirmed it had approached Bunge about a takeover that would expand the Swiss commodity trader's reach in global agricultural markets at a time when low crop prices have forced farming concerns to seek scale through mergers. Discussions may or may not take place, Glencore said then.

Since then, investors have sought clues as to whether Glencore and its deal-hungry chief executive, Ivan Glasenberg, would follow through on the approach, but the companies have said little in public. Given Bunge's current market value, a deal would likely value it at well over $10 billion.

Glencore and Bunge had originally been exploring a smaller deal, a person familiar with the matter said this week. In order to gain access to confidential information, Glencore agreed to the standstill and then sounded out Bunge on the idea of a full takeover. The standstill, which expires early next year, for now prevents Glencore from buying stock in Bunge or from making any public, unsolicited approach.

The existence of the agreement -- previously unreported -- raises the possibility Glencore is biding its time before making another approach, though it is unclear what, if any, its plans may be.

In August, an analyst asked Mr. Glasenberg on a conference call if Glencore would only pursue an agricultural deal on friendly terms. "Would we go friendly or hostile? I suppose we cannot really comment on that," Mr. Glasenberg said.

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A deal with Bunge would bring Glencore one of the most expansive networks of grain-shipping and processing facilities in North and South America. It would represent a long-term bet on demand for crop trading with the global population expected to hit 9.8 billion by 2050, according to the United Nations.

Bunge, based in White Plains, N.Y., had a market value of about $9.5 billion Friday morning. The company, which traces its roots to a Dutch firm founded in 1818, went public in 2001 and expanded on the back of a commodity boom between 2007 and 2013.

Bunge is among the world's biggest dealers in basic foodstuffs such as soybeans, corn and wheat. Alongside rivals like Cargill Inc., Archer Daniels Midland Co. and Louis Dreyfus Co., Bunge buys crops from farmers and grain elevators, sells them to food companies and livestock operations, and processes them into products like vegetable oil and flour.

In May, The Wall Street Journal reported that Glencore had approached Bunge about combining. Glencore later confirmed that its agriculture unit "made an informal approach to Bunge...regarding a possible consensual business combination."

Bunge's quarterly profits subsequently declined and its shares sank. After surging nearly 20% on news of the possible deal, the shares have given back all the gain and then some. They traded at just over $68 after the market opened Friday morning.

Bunge and other grain traders have struggled against low crop prices that have left farmers reluctant to sell their crops -- a factor Bunge officials in August said contributed to a 33% drop in second-quarter profit. Agricultural-commodity prices generally have lingered at low levels due to a succession of bumper harvests beginning in 2013.

Rising grain stockpiles also have eased concerns over potential supply shocks, leaving agricultural markets less volatile. That makes it harder for companies like Bunge to profit through trading.

Write to Dana Mattioli at dana.mattioli@wsj.com, Scott Patterson at scott.patterson@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

(END) Dow Jones Newswires

October 13, 2017 12:04 ET (16:04 GMT)