Kubota has positioning itself to stay up with the main broadacre runners with its surety in precision agriculture secured following the AgJunction buy out
AgJunction is an important technology source for Kubota Corporation and to sweeten a buyout deal it offered a no nonsense equity value all-cash transaction for US$72 million, and at a 60% premium on the stock’s trading price, a deal too sweet for AgJunction shareholders to refuse.
With technology supply options in agriculture being quickly bought out by John Deere and CNH Industrial it was leaving Kubota with few choices to improve its own technology stance, the company had to act now, and it did.
With this precision agriculture deal, Kubota will have access to advanced guidance, autosteering, and an expected autonomy solution to drive its tractors into the future.
Luckily for Kubota, AgJunction directors could see how agricultural machine automation was rapidly advancing and would as a result require increasing investment and consolidation by the company.
Adoption of current automation demands for agriculture vehicles would mean much more work for integration of AgJunction’s product lines along with a much larger scale distribution network.
Faced with a highly competitive landscape, AgJunction’s Board initiated a confidential process to consider expressions of interest from third parties who were contacted to determine their interest level in pursuing a strategic association with AgJunction.
Following a thorough review of available joint ventures, AgJunction’s Board determined that Kubota represents the best alternative to create substantial value for the product line. Also considering the existing strategic relationship between AgJunction and Kubota.
Under the deal struck, Kubota Corporation will acquire all issued and outstanding AgJunction common shares in exchange for the US$72 million payment.
The deal still needs final approval by AgJunction shareholders at a special meeting expected to be held in November 2021, where at least two-thirds of the votes cast will need to sanction the sale.
The sale will also be subject to the final approval of the Court of Queen’s Bench of Alberta and once granted the AgJunction common shares will be de-listed from the TSX.
And while the Kubota Corporation has to fork out US$72 million for the AgJunction product line, it does ensure the continued growth of the Kubota badge with its desired expansion into becoming a major broadacre player.