US – The world’s largest corn mill of global grain company, Archer Daniels Midland Co, has reached an agreement to buy smaller rival Bunge Ltd, as reported by Bloomberg, citing unnamed sources familiar with the matter.
The potential deal comes as large grain traders that make money by buying, selling, storing and shipping commodity crops have struggled with global oversupplies.
Thin margins have squeezed such trading operations, including those of ADM, Bunge, Cargill Inc and Louis Dreyfus Co, which together are known as the “ABCDs” and dominate the industry.
However, an ADM spokeswoman said in an email the company does not comment on “rumors or speculation.” Bunge declined to comment.
Bunge’s shares were up 4.9% while the shares of ADM were set to report its quarterly results, which were up 1.4%.
Any deal would likely face stiff scrutiny from government regulators and opposition from U.S. farmers who fear that handing more market control to ADM could hurt wheat, corn and soybean prices.
The companies would probably need to sell facilities in North America, such as grain silos, to win approval for a deal, analysts said.
A tie-up could also spark a bidding war for Bunge with Glencore, which already made an unsuccessful approach to Bunge last year.
Additionally, DowDuPont was also formed through the merger of Dow Chemical and DuPont, and separately Potash Corp of Saskatchewan Inc combined with Agrium Inc to form Nutrien.
Bayer AG is currently seeking to acquire Monsanto Co.
New York-based Bunge operates in more than 40 countries. Chicago-based ADM has customers in 160 countries and is the most U.S.-focused of the major grain companies.
A takeover would help ADM grow in South America, where Bunge is a major agricultural force.
As of Friday’s close, Bunge had a market value of about US$11 billion, while ADM was valued at US$23 billion.