Trimble and AGCO to form joint venture to better serve farmers worldwide with mixed fleet precision agriculture solutions

Trimble (NASDAQ: TRMB) announced a definitive agreement to form a joint venture (the "JV") with AGCO (NYSE: AGCO) to better serve farmers with factory fit and aftermarket applications in the mixed fleet precision agriculture market. Trimble and AGCO's shared vision is to create a global leader in mixed fleet smart farming and autonomy solutions. 

In aggregate, Trimble expects approximately $3 billion in value from the transaction from pre-tax cash proceeds, Trimble's 15 percent stake in the joint venture, and the related commercial agreements.

Trimble and AGCO joint venture intended to accelerate innovation in the Agriculture industry.

Under the terms of the JV, Trimble will contribute its precision agriculture business ("Trimble Ag") excluding certain Global Navigation Satellite System ("GNSS") and guidance technologies and AGCO will contribute its JCA Technologies business, which is a leader in the development of autonomous software for agricultural machines, implement controls and electronic system components. Trimble will receive $2 billion in pre-tax cash proceeds plus a 15% stake in the JV. In addition, the parties will enter into (i) a long-term Supply Agreement through which Trimble will provide the JV with key GNSS and guidance technologies ("Supply Agreement"), (ii) a Technology Transfer and License Agreement ("TTLA") to govern the licensing of Trimble trademarks and technology for use by the JV after the expiration of the Supply Agreement and (iii) a Positioning Services Agreement through which the JV will serve as a channel partner to Trimble for its positioning services in the agriculture market (collectively, the "Commercial Agreements").

Delivering a Leading Portfolio of Agriculture Technologies 

The JV will align two leading companies dedicated to serving farmers worldwide with cutting-edge technologies to help farmers drive productivity, efficiency and sustainability.  For customers, the JV's technology is expected to offer seamless integration and connectivity across geographies, equipment brands and the crop life cycle. For dealers, it is expected to better serve farmers with a broad, complementary, and leading technology portfolio.

"Farmers today are looking for mixed fleet solutions across their tractors and the implements that they use to most efficiently and sustainably feed the world. We believe a joint venture with AGCO, complemented by the successful mixed fleet approach that they have developed with their Precision Planting business model, can help us better serve farmers and OEMs together," said Rob Painter, Trimble's president and chief executive officer. "Trimble has a rich history of forming and cultivating joint ventures with industry leaders such as Caterpillar, Nikon and Hilti and we are excited about this opportunity with AGCO and its family of leading brands. We look forward to beginning a new chapter with AGCO to bring precision agriculture to both the factory and to the aftermarket."

"The exclusive access to Trimble Ag products, combined with AGCO's existing Precision Ag offerings, accelerates AGCO's growth ambitions around autonomy, precision spraying, connected farming, data management and sustainability," said Eric Hansotia Chairman, President and CEO of AGCO Corporation. "All of these touchpoints will result in our team being even more farmer focused."

Transaction Expected to Result in a Stronger, More Focused Trimble

Following completion of the transaction, Trimble will continue to deliver its differentiated technologies at the intersection of the physical and digital worlds across its core businesses.

The transaction is expected to result in significant benefits to Trimble, including:

Simplifies Connect and Scale Strategy

• Streamlines portfolio and increases focus on priority growth areas

• Reduces exposure to hardware-centric agriculture market while retaining highly recurring revenue Positioning Services business

• Retains core GNSS IP and will continue to innovate and offer across served markets, including the JV

Enhances Financial Profile and Flexibility

• Results in a higher mix of software, services and recurring revenue from 66% to 72% on a pro forma basis

• Results in a higher mix of recurring revenue from 49% to 55% on a pro forma basis

• Over $1.5 billion in net proceeds after tax used to repay $1.1 billion in debt and repurchase shares

De-risks Trimble's Channel Transition in the Agriculture Market

• Provides opportunity to partner with a leading OEM focused on serving the mixed fleet across the globe

• Comprehensive plan with a major OEM provider reduces uncertainties from the Trimble aftermarket channel transition

• Maintains ongoing participation in a leading Precision Ag asset

Trimble Financial Details

Trimble's precision agriculture business, which has historically been reported as part of Trimble's Resources and Utilities reporting segment, is expected to generate fiscal 2023 revenues of approximately $535 million and Adjusted EBITDA of approximately $185 million as part of Trimble. For comparative purposes, after giving effect to the transaction as if it had occurred on the first day of fiscal 2023, Trimble estimates that it would have generated approximately $65 million of revenue and approximately $15 million of Adjusted EBITDA from the Supply Agreement.

Following the launch of the joint venture, Trimble's 15 percent interest in the net profits of the joint venture will be included in Trimble's income from equity method investments, net. For comparative purposes, after giving effect to the transaction as if it had occurred on the first day of fiscal 2023, Trimble estimates that it would have earned approximately $25 million of equity income from its stake in the JV.

Trimble's Resources and Utilities segment also includes (i) forestry solutions used in the global forest supply chain, (ii) utilities software and solutions used to enable geospatial-centric enterprise asset management and (iii) positioning services which enables precision GNSS positioning and includes recurring revenue encompassing CenterPoint RTX, RangePoint RTX and ViewPoint RTX, which will remain with Trimble following the transaction in addition to revenue and income from the Supply Agreement with the JV. 

Timing and Approvals

The transaction is expected to close in the first half of 2024, subject to customary closing conditions including regulatory approvals.

Advisors

Centerview Partners LLC is acting as exclusive financial advisor to Trimble, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to Trimble.

Morgan Stanley & Co. LLC is acting as exclusive financial advisor to AGCO. Simpson Thacher & Bartlett LLP is acting as legal advisor to AGCO, and Troutman Pepper Hamilton Sanders LLP is acting as its financing counsel.