Founded in 1994 with a North American focus, AGI expanded through acquisitions and now sells to farmers in Asia, Europe and South America.DANIEL MIHAILESCU/AFP/Getty Images
Ag Growth International Inc. AFN-T recently rebuffed an unsolicited takeover offer made in the wake of a slide in the Winnipeg-based farm equipment manufacturer’s share price, a sign of the challenges facing a mid-sized player in an agricultural sector dominated by far larger companies.
The board at Ag Growth International, branded as AGI, turned down a bid from an industry rival priced at a 35-per-cent-plus premium to where the company’s stock is trading, according to a source familiar with the process. The source declined to name the potential buyer, and The Globe and Mail is not naming the source because they were not authorized to speak for the company.
An AGI spokesperson had no comment on reports of offers for the company, which sold $1.5-billion worth of crop and fertilizer processing, handling and storage equipment last year.
AGI, which has an $877-million market capitalization, is a target for deeper-pocketed rivals after a drop in its stock price left it valued at a significant discount to peers in the farm equipment industry, according to investment bankers and analysts.
AGI’s stock price has fallen 25 per cent since the company announced weaker-than-expected financial results on April 29. In a report, analyst Tim Monachello at ATB Capital Markets said investors are concerned the industry is heading for a cyclical downturn, with U.S. farmers spending less than expected on equipment. He said the stock price also fell on concerns AGI could face delays on major commercial projects.
“AGI’s stock performance opens a strong buying opportunity as the market has oversold the fundamental downside risk in 2024,” said Mr. Monachello in a report aimed at investors and published Monday.
Founded in 1994 with a North American focus, AGI expanded through acquisitions and now sells to farmers in Asia, Europe and South America. The company runs 30 factories across Canada and in the U.S., Brazil, India, France and Italy.
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In a report, analyst Andrew Wong at RBC Capital Markets said that while equipment sales may be slower than expected this year, “we do not believe the fundamental long-term growth thesis has changed.”
In 2022, AGI named former chief operating officer Paul Householder as its chief executive officer, replacing Tim Close, who ran the company for six years. Mr. Householder’s strategy includes expanding international sales of its core products, such as grain handling and storage equipment, while lowering debt levels. AGI’s customers are evenly split between farmers and commercial clients such as port operators and food processing businesses.
In the first three months of the year, AGI’s revenues were $315-million, down 9 per cent from the same period in 2023. Debt levels had declined to 2.9 times earnings before interest, taxes, depreciation and amortization (EBITDA), compared with 3.6 times EBITDA a year ago.
When the company announced its financial results on April 29, Mr. Householder said, “We are encouraged by our first-quarter results, which are largely on track with how we expected the year to begin.” He said U.S. farmers and food processing companies were delaying equipment purchases but sales were expected to pick up in the second half of the year.
AGI shares are widely held, with no single investor owning more than 10 per cent of the company.
Its publicly traded peers include Duluth, Ga.-based AGCO Corp. AGCO-N, with a US$7.9-billion market capitalization; John Deere parent Deere & Company DE-N, which has a US$103-billion capitalization; and Europe’s CNH Industrial NV, which is controlled by the Agnelli family and valued at US$13.4-billion.
Last September, AGCO spent US$2-billion to take control of the farm technology division of Trimble Inc., a software company. At the same time, it launched a strategic review of its grain and protein business, which competes with AGI. AGCO’s review, run by investment bank Morgan Stanley, is expected to result in the sale of the business.
There are also a number of deep-pocketed private companies competing with AGI in the crop processing and handling industry, including Berkshire Hathaway Inc.-owned CTB Inc., which is headquartered in Milford, Ind., and Sheffield, Iowa-based Sukup Manufacturing Co., the world’s largest family-owned grain storage company.