Funds Press for Change at Bunge -- WSJ

D.E. Shaw joins with Continental Grain in seeking board seats at the grain trading firm

By Dana Mattioli and Cara Lombardo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 9, 2018).

D.E. Shaw & Co. has boosted its stake in Bunge Ltd. and is pushing the grain trader to make operational improvements and add board members, according to people familiar with the matter.

The hedge fund is working with Continental Grain Co., an agricultural-investment firm. The firms, which together own less than 5%, have been speaking to Bunge's management in recent weeks and could reach a settlement with the company, the people said.

The investors are trying to convince the White Plains, N.Y., grain trader to make its operations more focused, improve margins, and replace board members. They aren't pushing for a sale of the company, which in recent years has received takeover interest from Archer Daniels Midland Co. and Glencore PLC, but eventually could do so, the people said.

"We have been engaged in ongoing dialogue with D.E. Shaw and Continental Grain and value their combined input, as we do with all our shareholders, with the objective of enhancing shareholder value," a Bunge spokeswoman said.

It isn't clear how much of Bunge D.E. Shaw owns, but the people said it is more than the 0.06% the hedge-fund firm disclosed as of the end of June.

Continental Grain owns more than 1% of Bunge's shares.

In March, The Wall Street Journal reported that Continental Grain was preparing to push Bunge to consider strategic options. Bunge, which has a market value of about $10 billion, was then in talks to sell itself to ADM. At the time, the negotiations were progressing at a slow pace and they later fell apart.

Last year, Glencore, a Swiss commodity trader, made a takeover approach to Bunge, but the two sides didn't come to a deal.

Based in White Plains, N.Y., Bunge is among the world's biggest dealers in basic foodstuffs such as soybeans, corn and wheat. Its shares have returned 6.9% over the past 10 years including dividends, much less than the S&P 500's 13.8% total return, according to FactSet.

Agricultural companies like Bunge and ADM have struggled with a growing glut of crops world-wide, brought on by consecutive bumper harvests in North and South America. Prospects this year have improved due partly to a drought in Argentina, which trimmed soybean stockpiles and helped lift prices.

Bunge in August surprised investors with a $12 million second-quarter loss, driven by derivatives positions designed to protect the company's soybean-processing profits. Bunge Chief Executive Soren Schroder said the company stood by its $1.3 billion full-year profit forecast, assuring investors the company has locked in favorable profit margins over the remainder of the year. The company is also cutting costs, and expects to eliminate $150 million in expenses this year.

D.E. Shaw -- which has been increasing its activist practice after hiring Quentin Koffey from Elliott Management Corp. -- typically prefers to work with management behind the scenes. The fund early this year shook up the board at Lowe's Cos. after presenting the home-improvement retailer research that included an analysis of satellite imagery of the number of cars in its parking lot compared to that of rival Home Depot Inc.

Jacob Bunge contributed to this article.

Write to Dana Mattioli at [e-mail] and Cara Lombardo at [e-mail]

(END) Dow Jones Newswires

October 09, 2018 02:47 ET (06:47 GMT)

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