October 2, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

Global agricultural machinery and precision ag company AGCO Corporation is forming a joint venture with technology and data analytics company Trimble, giving AGCO an 85 percent stake in Trimble’s portfolio of ag assets and technologies for $2 billion in cash and the contribution of JCA Technologies. 

Trimble Ag offers a wide array of user-friendly technologies that are compatible across brands, equipment models, and types of farming operations, including hardware, software, and cloud-based applications that span entire crop cycles from land prep to planting, seeding, and harvest. And once finalized, this deal will create a mixed-fleet precision ag platform that will be the exclusive provider of Trimble Ag’s technology offerings.

“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 Eric Hansotia, chairman, president, and CEO, AGCO. “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.”

AGCO has a history of expansionary deals and strategic agtech partnerships from entering the drone space in 2015 through a partnership with Agribotix, to its acquisition of Precision Planting LLC from The Climate Corporation in 2017, and a commercial and technical partnership with Solinftec – a Brazilian provider of insights driven by IoT, satellites, mobile tech, data processing, and AI – in 2019. 

This newest and largest joint venture will complement and enhance AGCO’s existing precision ag portfolio, cementing the company as the leading solution provider across the crop cycle while supporting more than 10,000 equipment models. 

The companies explained that by joining these two precision ag portfolio and leveraging multi-channel access across Trimble Ag, AGCO OEM (original equipment manufacturers) & Aftermarket, other OEM’s, and Precision Planting dealers, the venture will be well-positioned to drive significant growth and better provide next-gen technologies to more of the world’s farmers. 

And if the numbers are anything to go by, it’s a very high-potential market to dominate. A market analysis conducted earlier this year by Extrapolate predicts that the global precision farming market will see an impressive CAGR of 12.3 percent, to climb from a value of US$8.81 billion in 2021 to US$17.67 billion by 2028.

“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,” said Rob Painter, CEO, Trimble. “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.”

Hansotia added, “The exclusive access to Trimble Ag products, combined with AGCO’s existing Precision Ag offerings also accelerates AGCO’s growth ambitions around autonomy, precision spraying, connected farming, data management and sustainability. All of these touchpoints will result in us being even more farmer focused.”

According to plan, the commercial synergies generated from direct access to AGCO’s global OEM, aftermarket, other OEM, and retrofit channels, along with modest run-rate synergies that are expected, will approximately double the joint venture’s EBITDA within five years of closing. 

It was outlined that the $2 billion purchase price for AGCO’s 85 percent stake in the Trimble Ag business implies an enterprise value of approximately $2.35 billion and a transaction multiple of approximately 13.8x based on 2023E EBITDA of approximately $170 million.

By year three there are expectations of estimated revenue and run-rate cost synergies of $100 million,  and the net present value of tax attributes in excess of $50 million.

AGCO has also announced that its Grain & Protein business will be under strategic review as part of its broader portfolio transformation, noting that it will assess all strategic options for an outcome that will ensure its Grain & Protein customers receive the best possible service, and that the business is set to realize its full potential. 

Meanwhile, the joint venture deal with Trimble, which is anticipated to close in the first half of 2024, is not subject to a financing condition, as AGCO stated it has secured the necessary $2 billion through fully committed bridge financing from Morgan Stanley Senior Funding Inc., and that the purchase price is to be funded by a combination of existing liquidity, free cash flow generation, and new debt. 

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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