The maker of farm equipment, machinery and replacement parts, AGCO Corporation AGCO has entered into an agreement to acquire Cimbria Holdings Ltd. from Silverfleet Capital for approximately $340 million.The buyout will assist AGCO to expand its grain storage and seed handling business.
Cimbria, the Danish-headquartered manufacturer of equipment and processing lines for seed and grain, had been acquired by Silverfleet Capital, the European private equity firm, in Apr 2013. Following the acquisition, Cimbria has expanded into high-growth markets of grain and seed in Egypt and other Middle-Eastern countries. It also expanded its sales operations to cover after sales.
Cimbria’s extensive products and services include equipment for cleaning, drying and storing grain and seed through the development, manufacture and installation of individual machines, customized systems and complete turnkey plants. The company also provides project management and process-control consulting services to its customers.
Cimbria operates production facilities in four countries including Denmark, Austria, the Czech Republic and Italy and has approximately 900 employees. Cimbria sales, which are expected to reach approximately $240 million in fiscal 2016, are concentrated in Western Europe with growing exposure to Eastern Europe, Africa and the Middle East.
The Cimbria buyout will help in significantly enhancing AGCO’s market position in the European grain handling and storage industry. AGCO’s products are sold through five core machinery brands, one of which is GSI. Cimbria’s products are compatible with GSI’s offerings.
The acquisition is also favorable for AGCO as it will offer substantial marketing and cost-saving synergies as well as strengthen capabilities to serve global customers. Further, Cimbria acquisition will assist AGCO in business growth coupled with margin expansion.
The Cimbria acquisition is subject to regulatory approvals and is expected to close in third-quarter 2016. Rabobank is acting as the financial advisor and Herbert Smith Freehills is serving as the legal advisor to AGCO for the transaction.
AGCO’s GSI sales were up about 8% year over year, excluding currency impact and including the benefit of acquisitions for first-quarter 2016. It expects GSI sales to increase approximately 10% in 2016, compared to 2015, on a constant-currency basis. The takeover of Cimbria may boost GSI sales for the entire year.
AGCO currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the industrial products sector include Alamo Group, Inc. ALG, Altra Industrial Motion Corp. AIMC and Alarm.Com Holdings, Inc. ALRM. All these stocks carry a Zacks Rank #2 (Buy).
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