Global agribusinesses Glencore and Bunge have entered into a short-term standstill agreement preventing Glencore from a hostile bid for Bunge, which could indicates a possible renewal of Glencore’s interest in purchasing its competitor.
The deal followed Glencore’s unsolicited informal takeover offer, which it submitted to Bunge in May, saying “discussions may or may not materialise and there is no certainty that any transaction will occur”.
Bunge rejected the offer at the time and said it was “not engaged in business combination discussions with Glencore and was “committed to continuing to execute its global agri-foods strategy”.
But the standstill deal, set to expire in early 2018, could indicate that Glencore and Bunge were interested in partnering in a joint venture and – in the longer term – that Glencore purchasing Bunge was back on the table, wrote World Grain on 16 October.
According to Rober Moskow, a research analyst with Credit Suisse, the agreement gave Glencore access to otherwise confidential information but prevented it from making a bid until next year.
“We would not be surprised if such an arrangement and delaying any deal until 2018 would buy Glencore more time to reap additional FCF from current high copper, coal and zinc prices, boosting its ability to put forward a more attractive offer to Bunge, given Glencore is finalising US$1.5bn of recently agreed acquisitions,” said Moskow.
He added that Bunge’s recent purchase of IOI Loders Croklaan, combined with capital expenditure cuts and a US$250M cost savings initiative, seemed to have been undertaken to increase shareholder value instead of deterring a possible Glencore takeover.