AGCO Corporation has completed the acquisition of GSI Holdings Corp. from affiliates of New York-based Centerbridge Partners, L.P. for $928 million. Assumption, Illinois based GSI Holdings is a leading global manufacturer of grain storage and protein production systems with annual revenues of over $700 million.
In October this year, the company struck a deal to acquire GSI Holdings Corp. A few days back, AGCO had priced an offering of $300 million of its 5.875% Senior Notes due 2021 to partly finance the acquisition.
As of September 30, 2011, AGCO had cash and cash equivalents of $455.2 million, total debt outstanding of $535.8 million and a debt-to-capitalization ratio of 16%. With this note offering AGCO’s debt-to-capitalization ratio increased by approximately 690 basis points.
The GSI acquisition will propel farm equipment maker AGCO into the grain storage and livestock industries. This endeavor is integral to its new vision of expanding its product offerings and entering new markets. AGCO emerged in the early 1990s through a spree of acquisitions and after a lull of acquisition related activities the company is again looking for fresh targets to grow and expand.
GSI gives AGCO strong positions in the grain storage and protein production segments and gives it a baseline for future growth beyond its core farm equipment business. Furthermore, with GSI's 71% revenue coming from North America compared to AGCO’s 22% in North America, the deal will expand AGCO’s presence in this market.
The transaction is expected to be immediately accretive to earnings and cash flow. With a full product line of farm equipment and a wide network of dealers and distributors, we believe AGCO is well positioned, over the long term, to capitalize on the need for increased food production, driven by worldwide population growth.
Moreover, the company is also looking forward to expanding its operations in high-growth emerging markets, which bodes well for future operating performance. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock. We also reiterate our long-term Outperform recommendation.
AGCO Corporation is a leading manufacturer and distributor of agricultural equipment and related replacement parts. Its product line is categorized under five groups: tractors, replacement parts, combines, application equipment/sprayers and other machinery.
The company operates in four geographical segments: Europe/Africa/Middle East (EAME), South America, North America and Asia-Pacific. AGCO competes with the likes of CNH Global NV , Deere & Company and Kubota Corporation .