AGCO Announces Sale
In an agreement reached on Monday, AGCO Corporation will sell its Grain and Protein business to American Industrial Partners (AIP) for seven hundred million dollars. The transaction will be all cash and is subject to adjustments.
Strategic Transformation for AGCO
“The divestiture of Grain and Protein supports AGCO’s strategic transformation which was recently accelerated by the PTx Trimble joint venture that closed in April 2024,” said Eric Hansotia, Chairman, President and CEO at AGCO. He also added that “Divesting this business allows us to streamline and sharpen our focus on AGCO’s portfolio of award-winning agricultural machinery and precision ag technology products while maintaining a long-term view towards driving sustainable financial returns through high growth markets with high margin businesses generating strong free cash flows.”
New Potential for Grain and Protein Business
Hansotia continued: “We are confident that through AIP’s industrial sector experience combined with their extensive carve-out expertise they will find new ways for unlocking potential within the grain seed protein production equipment market space; thus ensuring our brands stay ahead locally among other regions where these equipments serve farmers best”.
Financial Details and Future Plans
The net proceeds from the sale should be used by AGCO for debt reduction, disciplined investments in technology, organic growth initiatives as well as returning capital to shareholders according to Hansotia. The company did not include its Chinese grain protein businesses when calculating financial projections related to this deal. As such it will continue reporting them as part of discontinued operations until they are sold off or otherwise disposed off. A loss between four hundred fifty million dollars ($450) – four hundred seventy five million dollars ($475) is expected from completing such sales but no later than Q2 2024 because it expects certain charges against earnings during that period due primarily due timing associated with accounting recognition requirements rather than anything else.
According to Hansotia, the multiple of approximately 8.3x based on Grain and Protein’s trailing twelve months adjusted EBITDA as of March 31, 2024 was used in calculating the transaction purchase price. The company expects regulatory approvals and fulfillment of customary closing conditions prior to year-end when this deal should close.
