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Shares of Trimble Inc. rallied Thursday after AGCO Corp. said it will pay $2.0 billion in cash to acquire an 85% stake in Trimble’s portfolio of agricultural assets and technologies.
As part of the deal, the companies will enter into a joint venture, which will be the exclusive provider of Trimble Ag’s technologies.
Trimble’s stock
TRMB,
rallied 4.3% in premarket trading, while AGCO shares
AGCO,
gained 0.6%.
“This landmark transaction creates a JV that becomes the premier mixed-fleet Precision Ag business in the world and accelerates AGCO’s strategic transformation,” said AGCO Chief Executive Eric Hansotia. “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.”
The companies expect synergies of $100 million by the third year after the deal closes, which is expected to occur in the first half of 2024.
AGCO, which makes agricultural machinery under brands including Fendt, Massey Ferguson and Precision Planting, expects to fund the deal with existing liquidity, free cash flow generation and new debt. The company said it secured $2 billion in fully committed bridge financing from Morgan Stanley Senior Funding Inc.
Separately, AGCO said that its grain and protein business “will be placed under strategic review,” as part of a broader portfolio transformation.
Trimble’s stock has slipped 2.7% year to date through Wednesday and AGCO shares have dropped 15.2%, while the S&P 500 index
SPX
has gained 11.3% this year.
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