Becoming a big force in agriculture is as easy as one, two,
At least, so Ivan Glasenberg may hope.
The Glencore chief executive, having turned the group into a
big noise in the likes of coal and copper, is now trying the same in the farm
Glencore's part-owned ag business, Glencore Agriculture, has
made an "informal approach" to Bunge, one of the "ABCD" group of big traders in
And he is doing so in three steps.
The first he has already achieved, to turn Glencore
Agriculture into something of an acquisition vehicle.
The division would have struggled for access to finance if
still a fully-owned asset of Glencore, whose borrowings have raised eyebrows
among ratings agencies and investors, and forced Mr Glasenberg into a spell
focused on good housekeeping.
But in selling a big stake in the division to two Canadian funds,
he not only raised a stack of cash, but deconsolidated Glencore Ag - putting it
at arm's length and giving it a life of its own.
That has freed it from any turbulence on the mother ship
(and cut the risk from feedback the other way too).
The second was to choose the right target.
Mr Glasenberg, a seasoned dealmaker, is not one to shy away
from taking a big step.
And Bunge, while not a simple target, looks the easiest member
of the ABCD group to swallow.
Buying Cargill, with a somewhat disparate family
shareholding, looks tricky, besides the size of the enterprise, while Louis
Dreyfus group's family owners, while having mulled selling a stake through
flotation, do not look likely to cede control.
From that perspective, buying a stockmarket-listed group
looks the easier course, and Bunge is a smaller enterprise than Archers Daniels
It also has a Dutch heritage, rather than US one, and boasts,
for instance, being Brazil's top ag exporter. That makes it less likely to tweak
any protectionist twinge in the Trump administration.
The third step was to choose the right moment.
Timing is always key in deals, and Mr Glasenberg has boosted
his chances of success by striking in a difficult time for ag traders, amid
weak crop prices and a relative lack of volatility. Bunge last month announced
disappointing results, sending its shares down 10% in a day.
That may have renewed questions among Bunge investors over
the sustainability of a strong recovery in the shares last year, although the stock,
which stood at $81.70 after a jump spurred by Glencore Ag's approach, still stands
well below the high of $135.00 it reached nine years ago.
This does not in any way guarantee success in the deal.
Indeed, that Bunge shares rose by 16%, well short of the premium
that Glencore would likely need to pay to secure a takeover, indicates that the
market sees significant doubt in a deal's success.
But Mr Glasenberg has given himself a fighting chance of spreading
into ag trading the consolidation wave evident in seeds and agrichemical groups.