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Mon May 17 2021

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Wirtgen sells out to Deere for €4.4bn

2 Jun 17 Deere & Company has signed a definitive agreement to take over the Wirtgen Group for nearly €4.4bn.

The Wirtgen product family
The Wirtgen product family

John Deere is a US company that dates back to 1837 and is globally synonymous with tractors and agricultural machinery. It also makes heavy construction machinery.

Wirtgen is a family owned German company that is a world leader in road building machinery. Its brands also include Vögele, Hamm, Kleemann and Benninghoven. It had sales of €2.6bn in 2016 and has 8,000 employees worldwide.

The purchase price for the equity is €4.357 billion in an all-cash transaction. The total transaction value is approximately €4.6 billion (US$5.2bn).

Deere expects to fund the acquisition from a combination of cash and new equipment operations debt financing.

“The acquisition of the Wirtgen Group aligns with our long-term strategy to expand in both of John Deere's global growth businesses of agriculture and construction,” said Deere & Co chairman and chief executive officer Samuel Allen. “Wirtgen's superb reputation, strong customer relationships and demonstrated financial performance are attractive as we expand the reach of John Deere construction equipment to more customers, markets, and geographies.”

Max Guinn, president of Deere's worldwide construction & forestry division, said: “This transaction enhances our global distribution options in construction equipment and enhances our capabilities in emerging markets. Spending on road construction and transportation projects has grown at a faster rate than the overall construction industry and tends to be less cyclical. There is recognition globally that infrastructure improvements must be a priority and roads and highways are among the most critical in need of repair and replacement.”

Wirtgen managing director Stefan Wirtgen said: “The Wirtgen Group has a legacy of technology and innovation with market-leading products and a strong focus on the customer. As we looked to the future, we specifically chose Deere as the buyer because of our long-held respect for the organization and our full confidence that Deere is dedicated to the ongoing success of the Wirtgen Group and our employees worldwide.”

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Jürgen Wirtgen, another managing director at Wirtgen, added: “Our company's strength and success comes from dedicated employees who are focused on helping customers succeed in the road construction industry. We believe this transaction allows the company to be successful well into the future – independent of our family ownership.”

Deere said that it plans to maintain Wirtgen’s existing brands, management, manufacturing footprint, employees and distribution network. The combined business is expected to benefit from sharing best practices in distribution, customer support, manufacturing and technology as well as in scale and efficiency of operations.

The purchase is subject to regulatory approval in several jurisdictions as well as certain other customary closing conditions. The companies said they expect to close on the transaction in the first quarter of Deere's 2018 fiscal year.

Philip Barker, partner and head of industrials at Cavendish Corporate Finance, commented:

“Given the backdrop of an increasing global infrastructure spend, companies are able to make long term strategic acquisitions such as this, and the timing on hitting the button on this deal may have been helped by the relative strength of the dollar against the euro over the last six months. Big corporates have been accumulating cash for many years since the financial crisis, and this source of strategic deal would have been years in planning.

“Following this acquisition, we would expect to see future acquisitions from Deere, possibly in advanced manufacturing technology to further improve operating efficiencies across its portfolio of products.”

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