AGCO will acquire Trimble Ag assets and technologies through joint venture

AGCO Corporation announced that it has entered into a joint venture (JV) with Trimble. AGCO will acquire an 85% stake in Trimble's portfolio of agricultural assets and technologies for a consideration of US$2 billion and the contribution from JCA Technologies.

According to the company's statement, the JV creates a global mixed-fleet precision agriculture platform that will be the exclusive provider of Trimble Ag's comprehensive technology offering, supporting the future development and distribution of next-generation agricultural technologies. "Trimble Ag offers a wide variety of easy-to-use technologies, compatible with brands, equipment models and farm types", states the official information.

“This historic transaction creates a joint venture that becomes the world's leading mixed-fleet precision agriculture business and accelerates AGCO's strategic transformation,” said Eric Hansotia, chairman, president and CEO of AGCO.

Through the "joint venture", support will be offered for more than 10 thousand equipment models. By combining these two Precision Ag portfolios and leveraging multi-channel access across Trimble Ag, AGCO OEM & Aftermarket, other Precision Planting OEMs and dealers, the JV "will be positioned to drive outsized growth and better deliver next-generation technologies for even more farmers around the world."

The company said it expects commercial synergies resulting from direct access to AGCO's global OEM, aftermarket, other OEM and retrofit channels, as well as modest run rate cost synergies, to approximately double the JV's EBITDA by year five. after closing.

“Farmers today are looking for mixed fleet solutions in the tractors and implements they use to feed the world more efficiently and sustainably,” said Rob Painter, CEO of Trimble.

The $2,0 billion purchase price for AGCO's 85% stake 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 the 2023 EBITDA of approximately US$170 million. Including estimated revenue and run rate cost synergies of $100 million through year three and the net present value of tax attributes in excess of $50 million, the synergized multiple is approximately 8,5x on a 2023E basis.

The transaction is not subject to financing conditions. AGCO has secured $2 billion in fully committed bridge financing from Morgan Stanley Senior Funding, Inc. The $2 billion purchase price 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.

Closing is expected in the first half of 2024, subject to satisfaction of regulatory approval and customary closing conditions.

AGCO also announced that the grains and proteins business will be placed under strategic review as part of the broader transformation of AGCO's portfolio. As part of this review, "AGCO will evaluate all strategic options to ensure that grain and protein customers are best served and that the business is best positioned to maximize its full potential."

Business characteristics

This involves the acquisition, by AGCO Corporation and Trimble Inc., of shared control of Trimble Solutions, LLC, a limited liability company ("limited liability company" - LLC). This is the last legal entity newly created under the laws of the State of Delaware (USA).

UPDATE ON 25/01/2024

In Brazil, the deal was approved without restrictions by the Administrative Council for Economic Defense (Cade). The decision appears in the Official Gazette of 24/01/2023.