Dive Brief:
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Agricultural machinery manufacturer Agco entered an agreement to sell the majority of its grain and protein business, part of the tractor maker's overall restructuring to focus on precision technology.
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American Industrial Partners will pay $700 million in cash to acquire Agco's grain storage equipment and solutions in addition to livestock management systems primarily tailored to poultry, swine and egg production.
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The deal is expected to close at the end of the year and involves the divestiture of brands including GSI, Automated Production, Cumberland, Cimbria and Tecno. The sale does not include Agco's grain and proteins business in China.
Dive Insight:
Agco placed its grains and proteins business under strategic review last September as the company looked to focus more on digital services and products, largely driven by its $2 billion purchase of Trimble Ag assets.
"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, which underpins a long-term focus on high growth, high margin and high free cash flow generating businesses," Agco Chairman, President and CEO Eric Hansotia said in a statement.
Agco's grain and protein brands recovered last year following labor shortages and higher steel prices during the pandemic, which pushed the company to close some factories. Grain and protein margins improved in the fourth quarter of 2023 despite lower sales.
Chief Financial Officer Damon Audia said during a May conference call that there was a "significant amount of external interest" in the grain and protein unit, which includes core brand GSI — the world's largest provider of steel farm bins and commercial storage grain bins.
American Industrial Partners is an industrial-focused private equity firm focused on buying and improving industrial businesses with operations in North America. AIP specifically invests in corporate divestitures, management buyouts or other transactions from established businesses.
"AIP has extensive experience in the industrial sector and vast carve-out expertise, which we believe will unlock new potential for the Grain & Protein business," Hansotia said in a statement. "We believe the move will help ensure its brands continue to lead the market in grain, seed and protein production equipment and remain well-positioned to deliver for farmers."
Agco’s grain and protein division generates annual revenue of approximately $1 billion and includes a footprint of 14 manufacturing facilities in North America, Brazil, Europe and Malaysia, according to a press release issued by AIP. Agco expects to incur a loss between $450 million to $475 million from the sale of the business.
