Glencore said that its agriculture division it had made an "informal
approach" to Bunge over a deal which would fulfil long-held plan to win scale
in the farm sector, ambitions restated in February.
Swiss-based Glencore said that its Glencore Agriculture
business - in which it sold a 50% stake last year to two Canadian pension funds
for more than $3bn – had approached Bunge "regarding a possible consensual
Separately, Bunge - one of the big four "ABCD" group of
agricultural trading houses, with Archer Daniels Midland, Cargill and Louis
Dreyfus – said that it was not not engaged in talks with Glencore.
"Bunge is committed to continuing to execute its global
agri-foods strategy and pursuing opportunities for driving growth and value
creation," the group said.
Bunge shares closed up 16.6% in New York overnight, giving it
a stockmarket capitalisation of some $11.5bn, with first reports of the
approach released before the Wall Street close.
Glencore shares eased
1.6% to 287.4p in early deals in London on Wednesday.
Glencore's approach follows a longstanding quest to ramp up
in agriculture, a sector in which chief executive Ivan Glasenberg has long
voiced ideas of tie-ups.
In February, Mr Glasenberg told investors that in
agriculture "we need to definitely grow South America and US a bit more" –
a footprint in which Bunge has particular strength.
Indeed, it was tight oilseed crushing margins in South
America, as a hold-out by Brazilian farmers for higher prices squeezed available
soybean supplies, that was blamed primarily for a tumble in earnings in the
Mr Glasenberg added: "We need infrastructure.
"Infrastructure is the key to the business. You can't trade
in the ag space without big infrastructure."
However, Glencore's ambitions have been undermined by the
extent of its existing debts, which have hampered its ability to pay for any significant
takeovers – without incurring the wrath of ratings agencies and investors.
Mr Glasenberg said in February that the sale of the stake in
its ag business had been part of a "shrink to grow" strategy, allowing the
deconsolidation of the business from the group accounts, and so creating a
fresh balance sheet.
The idea was "was to set up a structure where we can grow.
We've always said in the ag space, we need to grow, we want to grow.
"We decided we didn't want to do that all on the Glencore
"It would have been big expenditure, there's big assets
you'd have to buy. And, therefore, having a partner was a way to do it."
He likened to the strategy behind the group's creation of
mining group Xstrata "where we used 60% of the public's money, 40% of our own
"We owned 40% and that was the vehicle that we used to grow