THE WORLD grains industry could be in for a shake-up with the news Glencore Agriculture has informally approached fellow behemoth business Bunge about a potential takeover bid.
Along with its presence in mining, Glencore is also one of the world’s biggest players in soft commodities, while Bunge makes up one of the big four “ABCD” companies that dominate the grains sector, along with ADM, Cargill and Louis Dreyfus.
Glencore has confirmed it has made an informal approach to Bunge regarding what it described in a statement as a “possible consensual business combination”.
It marks a change in direction for Glencore, which has offloaded about 50 per cent of its agricultural assets over the past three years.
Bunge shares, listed on the New York Stock Exchange, rose 17pc on the back of the news.
But Bunge officials distanced themselves from the speculation.
In a statement, Bunge said it is not engaged in business combination discussions with Glencore and remained committed to its business strategy.
Should a takeover or merger occur it would have a massive affect on world grain supply chains.
Glencore, one of the top two buyers of wheat globally, is a major player in the European Union, Russia and Australia.
It also has a big market share in Canada due to its 2012 purchase of Viterra, however other than that it has a relatively low-key presence in North and South America.
Bunge, in contrast, is a US-based business and has a good footprint there as well as through South America.
In Australia, Glencore is an active buyer of grain and also runs the Viterra bulk handling network which handles nearly all of South Australia’s grain.
Bunge is a much smaller operation, but also has supply chain assets through a recently constructed port facility in Bunbury.
Australian Export Grain Innovation Centre (AEGIC) chairman Terry Enright said rationalisation was an on-going theme in the world grains industry.
“You look at the trading environment in grains in recent years, it has been difficult so any rationalisation would not be unexpected,” Mr Enright said.
In terms of the significant of a Glencore takeover of Bunge on Australian grain producers, he did not believe there would be major changes if a deal got over the line.
“The two don’t tend to overlap significantly,” he said.
“Bunge has set up infrastructure in Western Australia and you would expect whatever happens those facilities will continue to be used.”
Glencore officials have publicly said in the past they see any expansion of the agriculture business to centre on acquiring infrastructure assets.
Bunge is valued at $14.5 billion.
