Glencore a better own for Bunge than ADM

22.02.2018

Archer Daniels Midland may have the financial muscle to snatch Bunge, from under the nose of Glencore.

But is ADM the most appealing suitor?

That is one message that (Markets Extra believes) might be gleaned from reading between the lines of comments by Ivan Glasenberg, the Glencore chief executive, to investors, as he restated the raw materials giant’s appetite for deals in agriculture.

The ag trading industry “is in a poor state. It does need consolidation”, he told investors.

And Glencore, which has a 50% stake in Glencore Agri, would “like to be part of that consolidation”.

“We continue to look at opportunities.”

Geographic appeal

He added: “We have clearly said we would like to grow in the [United] States,” where the group is under-represented, compared with its strong footprints in the likes of Australia, Canada and Russia.

That would appear to make Bunge, which also comes with a big South American operation, a good match.

“But as we said earlier, it’s not growth for growth’s sake. It’s going to make economic sense.”

Or, you might say, Glencore, which has been in trouble with investors before over its debt levels, needs to take great care over the number of noughts when it comes to writing cheques.

‘Performed very well’

Not that this is, of course, any reflection on Glencore’s abilities in ag trading, with its 50%-owner Glencore Agri business proving “broadly consistent on a like-for-like basis in difficult market conditions.

“As you can see against our competitors, who have had difficult years, the ag business performed very well,” Mr Glasenberg said.

Or, you could read it, for Bunge to succumb to ADM would be to opt for second best.

But then, he would say that, wouldn’t he? At least, between the lines.


agrimoney

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