Bunge, the 200-year-old grain and oilseeds trader, is planning to establish a board committee to explore a sale of the company, in a deal with two activist shareholders including an agricultural investor with an even older grain trading pedigree.
New York-listed Bunge was on Tuesday finalising settlements with the Continental Grain company and DE Shaw, the New York hedge fund, to add four directors to its 11-member board, people familiar with the matter said. The settlements would also charge a strategic committee with considering ways to increase Bunge’s equity value, including a potential sale.
Continental has its own history with dealmaking in the grain sector. Launched in 1813 in France, the company for decades ranked in the top tier of international grain traders before selling the business to Cargill for $1bn in 1999. Under Paul Fribourg, a sixth-generation descendant of its founder, Continental has since operated as a food and commodities investor with holdings ranging from chicken farms to flour milling.
Continental earlier this year acquired a roughly 1 per cent stake in Bunge and began advocating for the company to sell itself, according to reports. Later it was joined by DE Shaw, which recently launched an activist investment strategy. Final settlements could be announced Wednesday morning, when Bunge is scheduled to report third-quarter results.
Bunge’s results have repeatedly disappointed investors, even as chief executive Soren Schroder has worked to slash costs and invest in more profitable sectors than the bulk agribusiness that generates most of its earnings.
Last year Glencore, the Swiss-based mining and commodities trading group, disclosed it approached Bunge about a tie-up but the idea did not progress. Talks about a potential merger with Archer Daniels Midland, another US-based grain trader, also did not advance.
After a bruising 2018, Glencore has turned its back on aggressive dealmaking with its chief executive Ivan Glasenberg telling investors in August that the best use of the company’s cash was to buy back its own shares.
Glencore has been hit by a string of problems this year, including a US investigation into bribery and corruption that has curbed its appetite for risk.
The proposed settlements would immediately add three mutually agreed independent directors to Bunge’s board, plus another by the end of 2018, people familiar with the matter said. At least one of them would represent Continental, a person familiar with the investment said.
The settlements would also lead to the creation of a strategic committee to consider ways to increase value for shareholders, including a possible sale of the company, people familiar with the matter said.
Continental has engaged in activism before. As a large shareholder of Smithfield Foods, a US pork producer, its advocacy hastened the sale of the company to Shuanghui International of China, now known as WH Group.
Bunge declined to comment. Earlier this month the company acknowledged it was “engaged in ongoing dialogue” with DE Shaw and Continental, “with the objective of enhancing shareholder value”.