Highlights and Analysis of AGCO Acquisition of Trimble Ag Assets and Joint Venture
Dissecting the largest precision agriculture deal the industry has seen to date.
AGCO to Acquire Trimble Ag Assets and Technologies Through a Joint Venture Focused on Next-Generation Precision Ag Technology - AGCO
AGCO Corporation, a worldwide manufacturer and distributor of agricultural machinery and Precision Ag technology, announced it has entered into a Joint Venture (JV) with Trimble, where 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.
This is a large and, I think, astute move from AGCO from a strategic perspective. It is one of the largest precision agriculture deals ever and is targeted to close in the first half of 2024.
The market appeared to like the acquisition with the AGCO stock rising on the day (flat on the week with a small sell-off to end the week):
Source: Google. Editor Note: I edited the verbiage above to state flat on the week when it previously said up on the week. At the time of posting (~10am MT Friday, Sept 29th) the stock was still up for the week.
I alluded to the potential of a strategic alignment between AGCO and Trimble last year when Trimble purchased Billberry— I wasn’t bold enough to suggest an acquisition, but this approach definitely appears to be the superior route.
It is technically an acquisition, yet has a unique angle to it being a joint venture:
AGCO will own 85% of the JV which includes the ag assets from Trimble, such as their displays, software, controls and other entities like Billberry. Trimble will own 15% of the JV. I don’t entirely grasp the rationale for not outright acquiring Trimble and whether it has to do with balance sheet constraints or a caveat on Trimble’s side (wanting to access upside later on).
The purchase price for the Trimble Ag business comes in at an implied enterprise value of approximately $2.35 billion and a transaction multiple of approximately 13.8x based on 2023E EBITDA of approximately $170 million.
For context, CNH Industrial purchased Raven in 2021 for $58 per share, giving it an enterprise value of $2.1 billion. Raven was acquired for somewhere around a ~56x EBITDA multiple. (For the Upstream Ag Insights overview, see here: CNH and Raven Announcement)
The future-focused technology is what I tend to focus on, but first and foremost, there are three important aspects that drive the deal rationale to call out before getting to that future-focused areas below:
Trimble products as the primary choice in all AGCO equipment.
Channels to market.