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Bunge’s Argentine Plants Behind ADM Bid

Soybean crushing facilities are key reason why ADM is attempting takeover

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On the banks of the Parana River, machines hum 24 hours a day in Argentina’s grain ports, churning out soybean-based animal feed and shooting it straight into the hulls of ships bound for buyers worldwide according to a report from The Western Producer.

The wind stirs up fine meal dust, creating a protein-filled haze. Rosario is the biggest soybean-crushing hub in the Americas, where 22 plants process 157,500 tonnes of soybeans per day into soybean oil and feed that fattens livestock in markets from the United Kingdom to Indonesia.

These plants are a key reason why top United States grains merchant Archer Daniels Midland Co. is attempting a takeover of longtime rival and soybean-crushing powerhouse Bunge Ltd., industry executives, analysts and grains trading sources said. The deal, estimated at $16 billion, would be the biggest ever by one of the world’s four agricultural trading giants.

ADM and Bunge are the “A” and “B” of the so-called “ABCD” group of firms that dominate global grains trading, along with Cargill and Louis Dreyfus.

ADM’s advance on the financially faltering Bunge reflects larger profit pressures across the grains sector amid a global glut now entering its fifth year, holding commodity prices at sustained multi-year lows. Such conditions are widely expected to drive a wave of consolidation among agricultural firms.

ADM is the only one of the ABCDs that has no crushing capacity in Argentina, where Bunge has four plants.

“Where is the value in Bunge from ADM’s point of view? It is in South America, including crushing and elevator capacity in Argentina,” said a Buenos Aires market source with knowledge of the situation.

ADM would also take on Bunge assets in Brazil, which include factories, mills, silos, distribution centres and port terminals. Bunge is bigger than ADM in Brazil, as well as in Argentina.

Juan Luciano, the Argentina-born chief executive officer of U.S.-based ADM, told investors this month that ADM aims “to plug holes in our value chain”, although he made no reference to reports the firm has approached Bunge.

“The hole in their value chain is called Argentina because ADM hasn’t any crushing facilities here,” said Buenos Aires-based August Remijsen, former Southern Cone chief executive officer of trading group Toepfer, which was recently absorbed by ADM. “The most efficient crushers in the world are located in Argentina.”

Representatives of ADM and Bunge declined to comment on the reported merger talks. Bunge last year turned down overtures from Switzerland-based Glencore.

Read the full report at The Western Producer.

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