AGCO Corporation to Acquire 85% Stake in Trimble

The US-based AGCO Corporation, a worldwide manufacturer and distributor of agricultural machinery and Precision Ag technology, has announced that it has entered into a Joint Venture (JV) with Trimble.

As part of the agreement, AGCO will acquire an 85% interest in Trimble’s portfolio of Ag assets and technologies for cash consideration of $2.0 billion and the contribution of JCA Technologies, the company said on Thursday.

The JV creates a global leading mixed-fleet Precision Ag platform that will be the exclusive provider of Trimble Ag’s comprehensive technology offering, supporting the future development and distribution of next-generation Ag technologies.

Trimble Ag offers a wide variety of user-friendly technologies compatible across brands, equipment models and farm types. Its hardware, software solutions and cloud-based applications span all aspects of the crop cycle, from land preparation to planting and seeding to harvest.

Eric Hansotia, AGCO’s Chairman, President and Chief Executive Officer, said that this landmark transaction creates a JV that becomes the premier mixed-fleet Precision Ag business in the world and accelerates AGCO’s strategic transformation.

“This deal significantly enhances AGCO’s technology stack with disruptive technologies that cover every aspect of the crop cycle, which ultimately helps us better serve farmers no matter what brand they use,” Hansotia explained.

The JV will complement and enhance AGCO’s existing Precision Ag portfolio to deliver even more industry leading solutions across the crop cycle while supporting over 10,000 equipment models.

New Technologies for Farmers

By combining these two Precision Ag portfolios and leveraging multi-channel access across Trimble Ag, AGCO OEM & Aftermarket, other OEMs, and Precision Planting dealers, the JV will be positioned to drive outsized growth and better provide next-generation technologies to even more farmers around the world.

Hansotia continued: “The exclusive access to Trimble Ag products, combined with AGCO’s existing Precision Ag offerings also accelerates AGCO’s growth ambitions around autonomy, precision spraying, connected farming, data management and sustainability. All of these touchpoints will result in us being even more farmer focused.”

Commercial synergies resulting from direct access to AGCO’s global OEM, aftermarket, other OEM, and retrofit channels, in addition to modest run-rate cost synergies are expected to approximately double the JV’s EBITDA by year 5 post closing.

Rob Paintyer, CEO of Trimble said that farmers were looking for mixed fleet solutions across their tractors and the implements that they use to most efficiently and sustainably feed the world.

“We believe a joint venture with AGCO, complemented by the successful mixed fleet approach that they have developed with their Precision Planting business model, can help us better serve farmers and OEMs together,” he added.

The $2 billion purchase price for AGCO’s 85% ownership in the Trimble Ag business represents an implied enterprise value of approximately $2.35 billion and implies a transaction multiple of approximately 13.8x based on 2023E EBITDA of approximately $170 million.

Inclusive of estimated revenue and run-rate cost synergies of $100 million by year 3 and the net present value of tax attributes in excess of $50 million, the synergised multiple is approximately 8.5x on a 2023E basis.

AGCO has secured $2 billion in fully committed bridge financing from Morgan Stanley Senior Funding, Inc. The purchase price of $2 billion is expected to be funded by a combination of existing liquidity, free cash flow generation and new debt. AGCO remains committed to maintaining its solid investment grade credit rating.

The deal is expected to close in H1 of 2024, subject to the satisfaction of regulatory approval and customary closing conditions.

AGCO has also announced that the Grain & Protein business will be placed under strategic review as part of AGCO’s broader portfolio transformation. Under this review, AGCO will assess all strategic options to ensure the Grain & Protein customers are serviced in the best way possible, and that the business is best positioned to maximize its full potential.

Centerview Partners LLC is acting as exclusive financial advisor to Trimble, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal advisor.