* Observers sceptical on "defensive" ADM approach to Bunge
* ADM seen facing U.S. antitrust hurdle, strategic quandary
* Glencore may revive interest for part or all of Bunge
* Bunge's South American assets could tempt COFCO
* ABCD grain giants grapple with low trading margins
PARIS/LONDON, Jan 25 (Reuters) - Archer Daniels Midland Co's move on fellow U.S. grain merchant Bunge is raising sceptical eyebrows, but makes more sense as a tactical step to ward off a possible rival predator - commodities trading giant Glencore.
Still, ADM is likely to face an array of business overlap and regulatory problems should it make a formal bid, and even if successful it might have to carve up Bunge's assets with Swiss-based Glencore.
In that scenario China's COFCO, which proclaims its ambition to sit at the top table of global food traders, may also be tempted to seek Bunge assets despite difficulties in digesting two major acquisitions it made in 2014.
ADM is one of a quartet of merchants alongside Bunge, Cargill and Louis Dreyfus - nicknamed the ABCDs after their initials - which has dominated trade in agricultural goods for decades. However, several years of big harvests and subdued prices have slashed margins for buying, selling and shipping crops.
Glencore already made an unsuccessful approach to Bunge last year, and now ADM's own proposal to acquire the White Plains, New York-based firm has revived the prospect of a wave of mergers and acquisitions.
"The ADM approach has to be considered defensive and is a clear example of the consolidation that is taking place in the grain and grain processing industries," Jay O'Neil, senior agricultural economist with Kansas State University, said.
ADM and Bunge have declined to comment on the takeover approach, while Glencore has not said whether it will resume its interest in Bunge, one of the world's top oilseed processors.
Many market participants doubt the wisdom of a full ADM takeover of Bunge, given antitrust issues that would arise in the United States, where ADM is the largest grain merchant.
ADM's pursuit of Bunge has also puzzled observers as it has focused on higher-margin food ingredients businesses since its $3 billion acquisition of Wild Flavors in 2014, while reining in spending on grain trading and processing.
However, ADM is likely to have an eye on Glencore, which is also one of the world's top mining and minerals trading groups.
"From an ADM perspective, Glencore absorbing Bunge would create a dangerous competitor for them. So they may be trying to deter Glencore," said Jean-Francois Lambert, founding partner of consultancy Lambert Commodities and a former HSBC banker.
According to sources, Glencore is subject to a standstill agreement with Bunge that prevents it from making a fresh approach following its unsuccessful move last year. However, this lapses in February or in the case of a rival bid.
A battle for Bunge is only one of several scenarios. The likelihood of U.S. regulatory hurdles means ADM could agree with Glencore to divide Bunge's assets, notably in the United States where the Swiss-based firm is known to be interested in expanding its relatively small presence.
This would also make more business sense. Glencore, which spun off its agriculture division a year ago after selling half of the business to two Canadian pension funds, appears better suited to acquiring Bunge.
"Glencore and ADM may bid against each other or they may find a nice way to split it up. But the synergies between Glencore and Bunge are much bigger than between ADM and Bunge, where there are huge overlaps," a senior banker said.
ADM already has experience of a difficult acquisition with Toepfer, a century-old German merchant over which it took full ownership in 2014. Traders say integrating Toepfer has brought internal headaches and limited benefits in trading.
"One of questions that ADM will have to answer is how do they avoid this becoming a costly exercise with no certainty that they can avoid the same mistakes that were made with the acquisition of Toepfer," a source familiar with ADM said.
Glencore's credentials as a dealmaker seem stronger. It bought Canada's Viterra in 2012 in one of the biggest grain deals of recent years, fending off interest from ADM, although moves on three or four smaller targets in the grain sector last year were unsuccessful.
It has been open about its preference for upstream assets where it sees greater scope for economies of scale.
COFCO International, the overseas arm of Chinese state-owned food group COFCO, is also a possible contender for some of Bunge's assets. Like ADM, it has struggled with integrating purchases - in its case Rotterdam-based grain trader Nidera and the agribusiness of Singapore-listed Noble Group for a total of more than $3 billion.
This threw up financial losses and led to a management reshuffle and heavy job losses last year. However, some sources with knowledge of the Geneva-based company have said the worst is now over. Yu Xubo, president of the Beijing-based parent, has said COFCO Group aims to become the largest international food trader by 2020.
COFCO International would seem an unlikely bidder for Bunge's U.S. assets as any suggestion of a Chinese state-controlled organisation running parts of the American agricultural supply chain would provoke political resistance, particularly under the Trump administration.
But COFCO could chase Bunge's South American assets, given a need to safeguard China's supply of protein feed and edible oil from soybeans. "Bunge's Brazil assets have the greatest value for COFCO," an investment fund manager said. "If it's deemed to be critical enough, I don't think financing and timing are so important for China."
A COFCO International spokesman declined to comment.
Some analysts see merit in ADM taking the initiative and betting on rising global food demand, for which soybean crops produced in the Americas will play a vital role.
But if it were to buy Bunge and then try to sell the U.S. assets it acquired to avoid overlap, an absence of COFCO International would probably narrow its options to Glencore.
"So ADM would only have one major real buyer for assets it will have to divest," one industry source said. "To me this whole thing doesn't look real."
While the fallout is unclear, ADM's move has lent weight to the argument that agricultural trading is set for a shakeup that may bring the end of the ABCD hierarchy.
"The potential to combine big industry players like ADM and Bunge will definitely be a wake-up call for others in the industry," O'Neil said. "There are many ways for this to play out; the game is not over yet."
(Additional reporting by Michael Hogan, Dimitry Zhdannikov and Veronica Brown; Editing by David Stamp)