(In 1st sentence, corrects to say Glencore is Swiss-based, not London-based)
By Tom Polansek and Rod Nickel
CHICAGO/CALGARY, Alberta, Jan 19 (Reuters) - Top U.S. grains merchant Archer Daniels Midland Co has proposed a takeover of Bunge Ltd, the Wall Street Journal reported on Friday, a move that could set up a battle for Bunge with Switzerland-based rival Glencore Plc.
Large grain traders which make money by buying, selling, storing, shipping and trading crops have struggled in recent years with the global oversupply. Thin margins have squeezed core commodity trading operations, including those of Bunge, ADM, Cargill Inc and Louis Dreyfus Co. Together the four are known as the "ABCDs."
Consolidation is seen as one remedy. Glencore last year sought a tie-up with grains trader Bunge in what was viewed as start of a wave of consolidation in the industry.
The Journal quoted unnamed sources as saying that ADM had made the approach and that details were unclear.
White Plains, New York-based Bunge operates in more than 40 countries and is Brazil's largest exporter of agricultural products, while Chicago-based ADM says it has customers in 160 countries.
Bunge, which has a market cap of $9.79 billion, closed up 11 percent at $77.56 on Friday. ADM has a market capitalization of $22.64 billion.
ADM said it does not comment on "rumors or speculation," while Bunge was not immediately available for comment.
STRATEGY SHIFT?
Grain companies have expanded into higher-margin endeavors, such as food ingredients and aquaculture, to offset weak results and wild swings connected to their traditional business of handling crops.
In 2014, ADM bought natural ingredient company Wild Flavors for about $3 billion in its biggest deal ever. The company has also expanded into handling healthy ingredients such as fruits, nuts and "ancient grains."
"News of the ADM bid is a bit surprising given that ADM had been indicating the company's strategic direction was more towards value-added rather the traditional commodities," said Farha Aslam, analyst for Stephens Inc.
HURDLES LOOM
Any tie-up would likely face stiff scrutiny from regulators and opposition from farmers who fear handing more market control to ADM could hurt prices paid for wheat, corn and soybeans.
The biggest overlap between ADM and Bunge in the United States is in grain origination and oilseeds processing, Aslam said. The companies would probably need to divest facilities in North America and also possibly in Europe, she said.
Aslam also said it was possible ADM and Glencore could partner in a bid for Bunge to split up its operations.