AGCO's Trimble Ag JV Acquisition Is A Value-Creation Moment, Says Analyst

Oppenheimer analyst Kristen Owen maintained an Outperform rating on the shares of AGCO Corporation AGCO with a price target of $153.

AGCO has agreed to acquire an 85% interest in Trimble Inc's TRMB portfolio of Ag assets and technologies for cash consideration of $2.0 billion and the contribution of JCA Technologies.

The JV is expected to be accretive to revenue growth (+$535 million), total company operating margin (32% adj. EBITDA margin), and EPS in the first FY post-close.

The analyst noted that this transaction strengthens AGCO's tech transformation and compliments their existing tech investments.

While reducing the uncertainty for TRMB's own channel development post-CNHI, the analyst believes the combined go-to-market can be a multiplier for AGCO's aftermarket solutions, as well.

The analyst remarked that TRMB's partnerships with European short-liners and its Mueller and Bilberry distributors can allow AGCO to quickly scale its Precision Planting footprint in Europe.

While unlikely to fully reduce cyclicality, the analyst believes AGCO's current past-peak valuation offers an attractive risk/reward trade off. 

From a transaction value standpoint, the $2 billion investment represents one of the highest cash-uses available to AGCO, while creating a transformative collective portfolio of technologies, said the analyst.

The analyst believes AGCO is well positioned to benefit from secular trends of digitization, automation, and autonomy unfolding in agriculture. 

Price Action: AGCO shares are trading lower by 1.63% at $118.85 on the last check Friday.