In what would be the largest acquisition in its history, Deere has agreed to buy Germany’s Wirtgen Group for about $4.88 billion to boost its road construction business.
According to Reuters, the deal will help reduce Deere’s dependence on its slowing farm business amid a slump in commodity prices that has left farmers with less cash to spend on equipment.
Deere said Wirtgen’s “highly complementary product portfolio” would enhance “Deere’s existing construction equipment offering and establishes Deere as an industry leader in global road construction.”
Wirtgen makes crushers that break down large rocks, milling machines, plants to supply hot asphalt for road projects, and pavers and rollers. Its five brand names include Hamm, Vögele and Wirtgen.
Deere provides equipment for the road-building process such as loaders and dump trucks, earthmoving tools at construction sites, and dozers and motorgraders that help grade roads.
“The acquisition will help Deere diversify its business which has been heavily reliant on agriculture while improving the distribution of its North American centric construction business,” William Blair analyst Lawrence De Maria told Reuters.
Max Guinn, president of Deere’s Worldwide Construction & Forestry Division, noted that spending on road construction and transportation projects “has grown at a faster rate than the overall construction industry and tends to be less cyclical.”
“There is recognition globally that infrastructure improvements must be a priority and roads and highways are among the most critical in need of repair and replacement,” he said in a news release.
Including the assumption of debt, the deal would value Wirtgen at 4.6 billion euros ($5.15 billion). The privately-held German company reported sales of 2.53 billion euros ($2.83 billion) last year and has about 8,000 employees.
Deere plans to maintain Wirtgen’s existing brands, management, manufacturing footprint, employees and network of company-owned and independent dealers in about 100 countries.
“As we looked to the future, we specifically chose Deere as the buyer because of our long-held respect for the organization and our full confidence that Deere is dedicated to the ongoing success of the Wirtgen Group and our employees worldwide,” Wirtgen Managing Director Stefan Wirtgen said.