Deere to acquire German road equipment manufacturer for $5B
- Deere & Co., the parent company of the iconic John Deere tractor, announced Thursday that it will purchase Wirtgen Group, a German manufacturer of road construction equipment, for approximately $5.2 billion, according to Reuters.
- Deere already makes rock-carrying dump trucks and loaders, earthmoving equipment and graders, but it said Wirtgen's line of products — with dealers in approximately 100 countries — will allow it to further expand into the global construction market.
- Although agriculture-related sales accounted for about 70% of Deere's total revenue in 2016, farmers had less to spend on new equipment. The company eliminated positions and reduced production of farming tractors and combines.
This move serves as a way for Deere to better position itself to accommodate an increase in the less volatile infrastructure construction sector, which has seen a renewed push around the globe, according to Forbes.
A likely factor in the company's strategy is President Donald Trump's $1 trillion infrastructure proposal — which is still in the early stages as Congress awaits a full bill — as well as an uptick in state-funded road and highway programs.
Deere is one of the infrastructure-related companies that typically sees a bump in stock price whenever it looks like the administration is getting closer to launching its long-touted program of transportation upgrades, construction and repairs.
In his 2018 budget request, however, Trump looks to cut funding for infrastructure-spending initiatives like Transportation Investment Generating Economic Recovery (TIGER) grants and the Federal Transit Administration's Capital Investment program. Some experts say cuts like these could be signals that the administration is trying to push states into funding their own major transportation projects if their impact will be mostly regional or local. In the budget request, Trump made it clear that his administration is prioritizing projects with national significance.
Deere has also made additional attempts at diversification through investments in telematics and drones. Earlier this year, the company announced that it had partnered with LHP Telematics to produce a telemetry product that can assemble fleet machine data into one location. Deere will also use its network of dealers to provide partner Kespry's drone solutions to its customers in concert with Deere's WorkSite product.
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