In what is being touted as the biggest ag technology deal in history, AGCO, a major ag and technology equipment company, announced Thursday a joint venture with Trimble‘s portfolio of agricultural assets and technologies.
AGCO will acquire an 85% interest in Trimble for $2 billion in cash, with closing of the deal anticipated in the first half of 2024. Trimble will retain 15% ownership, said Damon Audia, AGCO chief financial officer.
AGCO has been on an aggressive organic and inorganic ag tech investment track over the past several years. Eric Hansotia, AGCO’s chairman, president and CEO, said during an investor call Thursday that the acquisition is the largest in the company’s history, “one of the most transformational events in our technology evolution,” and "the largest ag tech deal ever."
Hansotia said the partnership will create an “industry leader in mixed fleet precision ag solutions.” Trimble will now be the exclusive provider to AGCO and support the future development and distribution of next generation ag products.
Today, AGCO uses Trimble and another providers for its GPS systems, but moving forward will exclusively utilize the Trimble technology.
“The transaction enhances and accelerates AGCO’s growth ambitions around autonomy, precision spraying, connected farming, data management and sustainability,” Hansotia said on the call. “The transformational nature of this deal will result in AGCO offering a comprehensive suite of disruptive technologies across the crop cycle to address the needs of tomorrow.”
Hansotia said the joint venture will allow AGCO to expand its guidance hardware as well as automate more activities for farmers through Trimble’s automated steering systems and connect with data via Trimble’s farmer software. Both companies focus on data platforms, but Hansotia anticipates their combined forces will allow them to offer improvements for the farmers they serve. Trimble has also made advancements in data collection for use in carbon trading platforms and embedding sustainability data and understanding into farming operations.
Hansotia also said up to this point, AGCO has also not really focused on water management. “Trimble brings that to the table,” he said.
Trimble’s ag products are sold in over 700 countries at 2,400 independent distribution points and utilized on an estimated 125 million acres worldwide, Hansotia said. AGCO will be evaluating its dealer network to see where it will begin to offer the Trimble solutions.
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Hansotia said there are almost no redundant features between the two portfolios. “Our strategies are so similar that we’re really the only two large equipment businesses or ag technology businesses that are focused on the mixed fleet,” he said. “Both of us wake up in the morning thinking about how we serve all farmers, regardless of what brand of equipment they have, both to selling new equipment and selling retrofit solutions as well as serving a large, long list of other OEM (original equipment manufacturers) partners and other companies that would like to utilize this technology to further enhance their machines.”
Trimble CEO Rob Painter said, "Farmers today are 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.”
The expected 2023 financial performance for Trimble Ag’s revenue is anticipated to be $535 million and EBITDA to be approximately $170 million, resulting in a margin of 32%.
“The acquisition is expected to be accretive to growth, operating margins and earnings within the first full year following close is anticipated to deliver a return on invested capital of approximately 10% by year three following close,” Audia said. “In addition to the strong market opportunities, we also see some incremental cost synergies as we are able to streamline some duplicative cost and refocusing key engineering talent into other areas, further accelerating growth and new product development.”
Audia added AGCO is also placing its grain and protein business under strategic review.
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