There is one thing we can be pretty sure of going into the New Year. The trends toward industry consolidation we’ve seen the past few years will carry over into 2017. Of course, it’s all speculation at this point, but there’s not much that should surprise us these days and in the current business environment.

Kubota made big news last spring when it announced it was acquiring Great Plains (“Kubota Takes Another Major Step in Move into ‘Big Ag’ with Acquisition of Great Plains Mfg.,” Ag Equipment Intelligence, May 15, 2016). The acquisition came 4 years after it purchased Kverneland. With its public intent to become the big player in the global ag market, Kubota has continued to keep the industry playing “what if” scenarios, and the ripples throughout the eco­systems that will accompany any of its moves.

More recently, New Holland acquired Kongskilde to fill in the till­age hole in its equipment offerings, as well as some additional hay and forage tools (“Kongskilde Acquisition Fills Out New Holland’s Product Lineup,” Ag Equipment Intelligence, Nov. 15, 2016).

Much speculation has surrounded Versatile and whether it is a candidate for acquisition or will be an active acquirer. (See our report in the Dec. 2 episode of On the Record.

A long time farm equipment indus­try executive, who did not wish to be identified, shared his take on some of the stories that are being bandied about at industry events with Ag Equipment Intelligence.

He pointed out that in almost all cases, the biggest challenge confront­ing equipment manufacturers that want to expand is distribution. There just aren’t enough well capitalized and qualified dealers to go around. Often times, a merger or acquisition is the only way around the problem. A manufacturer with established dis­tribution/dealer channels can make it an attractive takeover target.

Kuhn. The executive said Kuhn is one of the more interesting com­panies. “There are some strong inde­pendent companies in Europe (cit­ing Lemken in the tillage sector) but no one is as strong in the breadth of implements as Kuhn — with hay tools, planters and tillage. The only thing missing is a tractor and harvest­ing equipment.

“Kuhn wants to be in a leadership role. They don’t have Kubota-like aspi­rations to be bigger than Deere but want to make moves so that they can control their own destiny — and that requires distribution.” He notes that the acquisition in 2014 of Brazilian-based self-propelled sprayer manufac­turer Montana showed that Kuhn is open to entering new markets. “They have plenty of capital to think big.”

Claas. The number one problem for Claas North America is distribu­tion. “They’d love to bring tractors (Claas announced a limited introduc­tion to North America in 2014 with its Xerion) here, but their biggest dealers are CAT dealers, and they don’t want to bring a tractor to deal­ers that would have to compete with their AGCO mainline. The current dis­tribution situation is going to limit Claas’ growth potential — big-time.”

An interesting scenario for Kubota would be the acquisition of Claas, he says. “Kubota is still missing the big harvesting sector, so Claas would be a natural place to look. Again, for Claas North America, their biggest hurdle is distribution. They tried Caterpillar but that didn’t work out. Now they’re having to put in company stores in order to find distribution.”

In the past year, Claas stepped outside of traditional North American dealer channels and signed agreements with BayWa Ag of Munich, Germany, and MirTech (Mirovaya Technika) of Russia for sales and service support. BayWa will service the province of Alberta. MirTech will establish itself in the Western Delta region, where Holt CAT had withdrawn its Holt Agribusiness branches in Jonesboro, Ark., and Sikeston, Mo.

While the company is doing well financially (he noted that the compa­ny sold out its interests in the aviation industry and has not reinvested that capital yet), he views Claas as both a potential buyer and seller. “They real­ize the need to be full line; that they will have to broaden themselves and cannot be tied to another major as is the case with Caterpillar and AGCO.”

Interestingly, he notes that Claas has taken on representation of Kinze in the Italian market. Kinze, which like most other shortline equipment manufacturers in the past couple of years, is looking for a pick up in sales volumes. It is another fre­quently mentioned company that has something to offer an acquirer. One of the primary problems with Kinze, the exec believes, is the sheer size of the company’s production capacity that is sitting idle currently. “There’s so much production capacity out there, it will limit offers to only those who have biggest capacity needs.”

“Kubota, Kuhn and Claas are all strong companies. They realize that success down the road is dependent on a first-class global distribution net­work that offers a full line of equip­ment to support itself.” He added that the CNH acquisition of Kongskilde in late October also points toward a trend toward something more repre­sentative of North America’s full-line model taking hold in Europe.

                                    — Ag Equipment Intelligence, December 2016