Farmer Iron

Rumor Mill Fires Up

Equipment acquisition rumors are just part of the game.

Last week Agco's CEO Martin Richenhagen was quoted by the news service Reuters saying that he is "very interested" in the possibility of doing a major merger or acquisition deal in North America, and tongues started wagging. The exclusive interview with Reuters was also optimistic that this would be a good year for farm income and equipment sales. Mr. Richenhagen is a tough competitor and he has a strong understanding of the forces at work in the market.

But an acquisition in North America? Of course, likely candidate names started popping up - the first being CNH, the corporate owner of the Case IH and New Holland brands. CNH, while a publicly traded company, is owned mostly by Fiat and there's talk that as Fiat moves more into the auto business (after swallowing Chrysler essentially whole), that farm equipment division may be a "non-fit" for the Italian firm.

Reuters calls Agco a marginal player in North America, but credits Bob Crain, who heads up that business, with making it profitable. The company has larger market shares in Europe and South America, yet North America remains a plumb in the eye of any farm equipment executive. We have the most profitable farmers and we buy a lot of larger, higher-margin equipment.

However, anti-trust gurus will probably note that any more consolidation among the major farm equipment players may not work. When Case IH and New Holland merged, the lines that got dropped - the Genesis tractor from New Holland (that went to Buhler Industries); and Maxxum line at Case IH (which eventually went to the Morra family which created McCormick International) - were significant.

I'm not sure how regulators would look on an Agco (Massey Ferguson, Agco and Challenger brands) purchase of CNH brands now. But chances are good that a major merger would have to clear a lot of hurdles. Yet as a journalist rumors like this are great grist for the information mill. We'll keep watching and keep you informed.

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