AGCO is buying an Illinois manufacturer of grain silos and chicken and hog farm equipment in a $940 million deal that will boost its North American operations.
AGCO Chief Executive Martin Richenhagen said the acquisition of GSI Holdings Corp. from a private equity firm, announced Monday, is the largest ever for Duluth-based AGCO.
With the deal, AGCO, the world’s third-largest maker of tractors, harvesters and other farm machinery, also seems to be putting its growth in North America in higher gear.
The company said the GSI acquisition is expected to boost its sales by about $700 million, with over 70 percent to farmers and large agricultural firms in the United States such as Cargill, Bunge and Tyson.
AGCO generated about half of its $6.9 billion in sales last year in Europe, Africa and the Middle East, while only 22 percent was in North America. But earlier this year, the company announced plans to produce high-horsepower tractors at an existing factory in Minnesota. The tractor model was previously made only in France. AGCO also said it was spending $40 million to upgrade a Kansas plant as part of its bid to woo more farm customers in North America.
AGCO, which has 14,300 employees worldwide, said the acquisition of GSI Holdings will result in few, if any, additional jobs at its 500-employee headquarters.
However, Richenhagen said the deal likely preserves GSI’s 1,600 U.S. jobs at facilities in Illinois, Iowa and Alabama. Two other bidders were companies from China and Canada, he said.
“I think they would have moved production out of America,” he said.
GSI, based in Assumption, Ill., has 2,600 employees worldwide in more than a dozen plants, warehouses and offices scattered from Illinois to China and Malaysia. About half of the facilities are in the United States.
AGCO is buying the company from Centerbridge Partners L.P., a private investment firm in New York City. AGCO said it expects to complete the acquisition by year-end.
In a report Monday, Standard & Poor’s analyst Dan Picciotto said AGCO’s plans to buy GSI using bank loans will nearly double the company’s debt, but the credit-rating firm didn’t change its rating or outlook for the manufacturer. He said the deal will crimp AGCO’s ability to make other debt-financed acquisitions for the next year or so, but added that its agricultural market remains strong and that its sales and profits will likely rise this year.
AGCO, which was formed in 1990 as the result of a management buy-out, grew by buying up about 20 agricultural equipment makers. Its brands include Massey Ferguson, Challenger, Fendt and Valtra.
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