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Deal or no deal?

Last wednesday, Reuters News Agency reported that AGCO’s chairman, president and CEO, Martin Richenhagen, publicly stated he wanted to buy CNH Global, the company that controls New Holland and Case IH.
Mr Richenhagen reportedly revealed during an interview with an Italian newspaper that he had met with Sergio Marchionne, Fiat SpA’s chief executive, to discuss that possibility. (Fiat is the parent company of CNH Global.) But apparently there was no firm commitment from Mr. Marchionne to even consider selling the company. 
“Marchionne knows where to find me and has my telephone number. And he knows we are interested in CNH,” Richenhagen said. But things don’t seem to have completely ended there. The Reuters report suggested there must have been at least a glimmer of interest in Mr. Marchionne’s eyes, because background work for such an acquisition was apparently begun.
Here’s how the Reuters article reads: “AGCO, whose brands include Massey Ferguson, is moving ahead on a possible CNH merger by studying antitrust issues and on financing ‘to understand who could accompany us in a similar operation’, Richenhagen said.” If that’s true, it sounds at least a little optimistic.
For more than a year, there has been speculation in the industry that AGCO might acquire CNH. In fact, Mr Richenhagen, himself, said in June of 2009 that the company was interested in a major acquisition to bolster its position in the North American market. There are really only two possibilities for a major acquisition, CNH and John Deere; and Deere is too big for AGCO to swallow. So the logical target was CNH.
But by Friday of last week things had taken an odd turn after the industry started to buzz with interest on the possible mega merger. AGCO’s stock price dropped slightly, CNH’s rose by 1.75 per cent, and Fiat’s soared to its highest level since 2008. 
When Mr Richenhagen was interviewed again and an updated article appeared on on Friday, he distanced himself from that first Reuters report, saying his earlier comments were purely hypothetical. 
Mr. Marchionne, too, downplayed the possibility of any potential deal. “No, I don’t want sell it,” he said in an interview with Dow Jones Newswires. “There is no reason to sell it; CNH is a great business.”
While all this seems to have generated more than a little confusion, there is even more to consider.
In January, Fiat will split into two separate companies. CNH and Fiat’s heavy truck company, Iveco, will form an industrial organization, while Fiat and Chrysler will form an automotive entity. Why is that important? There has also been industry speculation as far back as 2009—about the same time AGCO first announced it was interested in a major acquisition—that Fiat wanted to unload its industrial companies and concentrate on the automotive sector,
And a German newspaper reported Daimler was interested in Fiat’s future industrial arm back in September, when Fiat reportedly issued a statement saying it was “looking at cooperation opportunities”.
While some suggest the new corporate structure would accomodate an easy sale of the industrial end of Fiat’s holdings, others say it makes it less likely. 
So far this year AGCO has already written a few cheques for other relatively small acquisitions. It purchased the remaining 50 percent of Laverda, an Italian combine manufacturer, which gives it full ownership of that business. And it purchased 50 percent of some of Amity Technology’s seeding equipment.
All of these acquisitions and talk of acquisitions come despite management’s statement earlier this year that the company had moved from one that purchases technology to one that develops it. I guess old habits are hard to break.
As it stands now, AGCO is the third largest farm machinery manufacturer on the planet, pretty good for a company that didn’t even exist a little more than 20 years ago. Clearly, Mr Richenhagen has even bigger plans for it. Whether or not it will continue to grow in small steps or one very big jump likely depends on his ability to sweet talk Mr, Marchionne out of CNH.

About the author


Scott Garvey

Scott Garvey is a freelance writer and video producer. He is also the former machinery editor at Grainews.



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