6 December 1996

Fendt/AGCOdeal on cards

By Peter Hill

RUMOURS sweeping the machinery stands at last weeks Royal Smithfield Show of a possible deal between Fendt and AGCO have resulted in confirmation of late-stage negotiations between the two companies.

A statement issued by the Bavarian tractor manufacturer late last week, revealed that the two companies have applied to Germanys equivalent of the Monopolies and Mergers Commission to sanction the acquisition by AGCO of a majority shareholding in Fendt.

For Fendts UK importer, Bonhill Engineering, the Smithfield rumours took the gloss off a successful first appearance of the 260hp Fendt 926 Vario, with its unique hydro-mechanical transmission. Even the presence of the German companys chairman and chief executive, Dr Georg Gickeleiter, who questioned whether such a deal could be sealed in his absence, failed to quell concerns over the possible consequences of an AGCO take-over.

The application to the Federal Cartel Office suggests the two companies have reached common ground on a deal that would meet AGCOs European ambitions of acquiring a major tractor brand to add to its Massey Ferguson business.

AGCO chairman and chief executive, Robert Ratliff, has made no secret of his wish to expand in Europe and is reportedly prepared to spend $1.5bn (about £900m) over the next five years as part of a strategy to increase sales outside North America from $2.1bn to $5bn by early next century.

AGCO is already bidding for Polands Ursus, and now Fendt, still a privately-owned company and German market leader, appears willing to help meet those ambitions.

Nothing is finalised, however, and Fendts statement makes it clear that selling a majority shareholding is an option; the company has also been investigating a stock exchange floatation in recent months.

That would raise useful capital, but would not provide the distribution access, entry to new markets and increased volumes that selling out to AGCO should achieve, and which any substantial manufacturer is thought to need to survive the long-term downward trend in tractor unit sales.

Fendt to join AGCOempire? A deal could soon be in the offing?