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Glencore says would prefer to grow business through acquisitions

Glencore says would prefer to grow business through acquisitions Glencore says would prefer to grow business through acquisitions
Nellie Chapman | 25 May, 2017, 07:16

Shares of the White Plains, New York, U.S. -based company soared by as much as 17% minutes after news of Glencore's takeover approach was reported, the biggest intraday jump for the company in nine years.

A deal with Bunge could transform Glencore into a major force in the US agriculture sector and would make the Swiss company's Canadian joint venture the latest foreign entity to own of a piece of the USA food chain.

Glencore, the commodity giant led by billionaire Ivan Glasenberg, has made a takeover approach for U.S. grain trader Bunge, in a move that could reshape an industry long-dominated by four companies.

"Following this informal approach from GAL, discussions may or may not materialise and there is no certainty that any transaction will occur".

Shares of Bunge surged on reports of the talks, which were confirmed in the Glencore statement, released in mid-afternoon.

It added: "Bunge is committed to continuing to execute its global agri-foods strategy and pursuing opportunities for driving growth and value creation.". Company CEO, Soren Schroder, told analysts in an earnings conference call, subsequently, that the sector would start to consolidate in response to the ongoing decline in profit margins for the big players.

It then sold off 9.99 per cent to the British Columbia Investment Management Corporation, for almost $US625 million, retaining a controlling 50.01 per cent stake. However, we do believe this is a business that needs to grow. "Hopefully it will get bigger in the future". "It's a part of the business we miss".

Germany's Bayer AG plans to acquire USA -based Monsanto Co, the world's biggest seed maker, as part of a wave of consolidation in the seed and agrochemical industry that could shrink six large companies into four. You can't trade in the ag space without big infrastructure.

The last time there was a round of mergers in the industry, it wasn't the ABCDs that led the way, but Glencore, which bought Canadian grain merchant Viterra Inc. for C$6.1 billion ($4.5 billion) in 2012, and Japan's Marubeni Corp., which acquired Gavilon Group LLC for $2.6 billion the following year.

Glencore's approach lines up with a statement made by its largest shareholder and CEO Ivan Glasenberg, who in February said he wanted to grow the groups agricultural trading operations in the United States where he felt that Glencore was underrepresented. The US company has a market value of about $US11.3 billion ($15.1 billion).