A takeover by Glencore of US-based ag giant Bunge "could be possible this year", Credit Suisse said, cutting its scepticism on a deal after the commodities group unveiled some wriggle room in its financial guidance.
Credit Suisse analysts - who last month flagged a "diminished risk" of Glencore succeeding in the takeover, after using up financial firepower on the acquisition of a stake in Hunter Valley coal operations – said that a Bunge could in fact be possible "in the near term".
The analysis followed Glencore comments on Thursday, as the group unveiled a return to first-half profit, signalling some potential for raising its debt above its self-proclaimed ceiling of $16bn
Steven Kalmin, the Glencore finance director said that while $16bn was "a pretty robust cap that we've been looking to manage the business around, I'm not saying we're going to die in a ditch" if it is breached in the short term.
"It's not going to go to $27 billion or whatever," Mr Kalmin, but signalled that it might "temporarily" exceed the cap, depending on the asset acquired it taking out the debt.
Sugar division sale?
Credit Suisse said, following the comments, that "we therefore infer that a Bunge acquisition could be possible this year [and] that the company is keen on exploring ways to do it".
A deal could be facilitated by Glencore taking on "a bit more debt", although the bank added that "we would think management would not want to do this in a significant way, say out to $18bn and then soon back".
The acquisition of Bunge, which has a stockmarket value of some $11bn, could also be enabled by making the US group a smaller target, through the sale of some operations.
"Bunge's sugar business could be a potential non-core asset sale, fetching in the region of $1.5bn."
Bunge has itself mulled the sale of the Brazil-based sugar business.
'Willing to dilute'
Furthermore, Glencore could reduce its shareholding in the Glencore Agriculture business which would be used to buy Bunge, and in which the group has already sold a 50% stake to Canadian pension funds.
"We now see some possibility of the company lowering their stake which would in turn reduce the capital the company has to commit to an acquisition," Credit Suisse said.
Ivan Glasenberg, the Glencore chief executive, said that the group "would be willing to dilute" its stake in Glencore Agriculture "for the right reason or the right logic".
He drew comparison with the group's strategy over Xstrata, in which it started off with a stake of 40% and "diluted slowly down to about 34%".
'Looking at opportunities'
Mr Glasenberg also, while failing to comment on the takeover of Newy York-based Bunge, highlighted voids in Glencore Agriculture's operational geography.
"We're very strong in certain countries in the world. We're not well set in the United States," he told investors.
"In the United States, we don't have much infrastructure to be able to be active in the agricultural business," which he termed "an infrastructure game.
"You have to own infrastructure, so therefore, you can source from the farmer and then get it through the system to get it on board vessels. And we do need infrastructure."
The business was "looking at various different opportunities" in the US, Mr Glasenberg said, noting also the existence of "smaller operators", in a sector which was "not fully consolidated".