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ADM in talks to buy Bunge as early as this week -Bloomberg

Reuters - UK Focus

(Adds background, latest share prices)

Feb 5 (Reuters) - Top U.S. grains merchant Archer Daniels Midland Co could reach an agreement to buy smaller rival Bunge Ltd as early as this week, Bloomberg reported on Monday, citing unnamed sources familiar with the matter.

The potential deal comes as large grain traders that make money by buying, selling, storing and shipping commodity crops have struggled with global oversupplies. Thin margins have squeezed such trading operations, including those of ADM, Bunge, Cargill Inc and Louis Dreyfus Co, which together are known as the "ABCDs" and dominate the industry.

Reuters, citing a source, reported last month that ADM had proposed a takeover of Bunge.

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An ADM spokeswoman said in an email the company does not comment on "rumors or speculation." Bunge declined to comment.

Bunge's shares were up 4.9 percent in morning trading. Shares (Berlin: DI6.BE - news) of ADM, which is set to report its quarterly results on Tuesday, were up 1.4 percent.

Any deal would likely face stiff scrutiny from government regulators and opposition from U.S. farmers who fear that handing more market control to ADM could hurt wheat, corn and soybean prices. The companies would probably need to sell facilities in North America, such as grain silos, to win approval for a deal, analysts said.

A tie-up could also spark a bidding war for Bunge with Glencore (Frankfurt: 8GC.F - news) , which already made an unsuccessful approach to Bunge last year. Glencore could buy assets that ADM and Bunge divest as well. Glencore declined to comment.

Talks between ADM and Bunge come after a wave of merger mania has already swept through the U.S. farm sector. Last year, DowDuPont was formed through the merger of Dow Chemical (Swiss: DOW-USD.SW - news) and DuPont, and separately Potash Corp of Saskatchewan Inc combined with Agrium Inc (Dusseldorf: AGU.DU - news) to form Nutrien. Bayer AG (IOB: 0P6S.IL - news) is seeking to acquire Monsanto Co.

New York-based Bunge operates in more than 40 countries. Chicago-based ADM has customers in 160 countries and is the most U.S.-focused of the major grain companies. A takeover would help it grow in South America, where Bunge is a major agricultural force.

As of Friday's close, Bunge had a market value of about $11 billion, while ADM was valued at $23 billion.

(Reporting by John Benny in Bengaluru. Additional reporting by Tom Polansek in Chicago. Editing by Maju Samuel and Nick Zieminski)