AGCO Corp said it would acquire an 85% stake in navigation products maker Trimble’s agribusiness for $2.0 billion in cash as the tractor and seeding equipment firm seeks to boost its precision-agriculture portfolio.
The race among farm-equipment companies to automate agriculture has accelerated, as drought in key grain-producing countries and the war in Ukraine fuels a global food crisis, with U.S. farmers scrambling to boost crop yields.
“This deal significantly enhances AGCO’s technology stack with disruptive technologies that cover every aspect of the crop cycle,” AGCO Chief Executive Eric Hansotia said.
The company said the deal would also support its ambitions of developing autonomous equipment as farm equipment makers look to combine cutting-edge hardware with software aimed at maximizing crop production and tap into recurring revenue from software offerings.
The precision-agriculture approach employs technology and the global positioning system to ensure that seeds, fertilizer and chemicals are used correctly.
“We believe the acquisition is a value creation event for AGCO, with the potential to lift consolidated profit margins, while deploying excess cash for growth that is already well-aligned with its OEM-agnostic Precision Planting channel,” Oppenheimer analysts said in a note.
Shares of Trimble, whose agribusiness offers software and cloud-based applications that help farmers in all aspects of the crop cycle, rose 1.7% to $50.1 in early trade.
The stake’s purchase price represents an implied enterprise value of about $2.35 billion for the business, AGCO said.
AGCO, which also said it would place its grain and protein business under a strategic review as it seeks to transform its portfolio, has secured $2.0 billion in fully committed bridge financing from Morgan Stanley for the transaction.
