MILAN, 23 June 2021: CNH Industrial has struck a USD 2.1 billion deal to buy Raven Industries to strengthen its agricultural equipment business, as the Italian-American vehicle maker prepares to spin off its truck, bus, and engine operations.
Raven shares rose by 50% in New York since this announcement, lifting its market capitalization into line with the terms proposed by CNH Industrial, whose Milan-listed stock turned slightly positive after initially falling by as much as 5.6%.
Barclays and Goldman Sachs were financial advisors to CNH Industrial in the deal, while JPMorgan Securities advised Raven Industries.
The deal is expected to generate around USD 400 million of run-rate revenue synergies by 2025, resulting in USD 150 million of incremental core profits (earnings before interest, taxes, depreciation, and amortization).
CNH Industrial Chief Executive Scott Wine said that "Precision agriculture and autonomy are critical components of our strategy and Raven also produces high-performance specialty films as well as aerospace and defense solutions."
Furthermore, Wine described the proposed purchase as "truly transformative" and left the door open to more acquisitions to expand what it is able to offer in the businesses it retains. We will absolutely consider strategic acquisitions if we need to grow faster or more profitably.
CNH Industrial will pay USD 58 per share for the US agriculture technology company, a 33.6 percent premium to Raven's four-week volume-weighted average stock price, giving it an enterprise value of USD 2.1 billion, the companies said.
Analysts at Bestinver Securities said the news was positive as Raven's "cutting-edge" technology in the agriculture industry would further enhance CNH Industrial capabilities. But However, the acquisition came at a cost.
CNH would complete early next year a plan to spin-off and separately list its lower-margin Iveco truck and bus units along with its FPT engine division, to boost asset values and streamline its businesses. The company will also retain its construction equipment business after the spin-off.
The Raven buy, which marks the largest M&A deal for CNH Industrial since it was formed in 2013, requires approval from Raven's shareholders. It is expected to close in the fourth quarter and will be funded with CNH's available cash, the companies stated in a joint statement.
CNH Industrial the world's second-largest agricultural equipment maker after John Deere, operating under the New Holland, Case IH, and Steyr brands is controlled by Italy's Agnelli family through its holding company Exor EXOR.MI said it did not expect the proposed acquisition to have any impact on its financial forecasts for this year, including cash flow.
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