AGCO Corporation: Attractive Valuation With Activist Onboard

By Alex Gavrish, Etalon Investment Research; author of "Wall Street Back To Basics"

Blue Harbour Group initiates a position in AGCO Corporation

On August 14th, 2014, Blue Harbour Group disclosed a small stake of 0.9% in shares of AGCO Corporation ( AGCO), a leading manufacturer and distributor of agricultural equipment worldwide. As of June 30th, 2014, the position accounted for 1.8% of Blue Harbour’s overall portfolio. Blue Harbour Group is an activist hedge fund and is managed by Cliffton Robbins. Blue Harbour is known for its activist investments, while working in a collaborative and supportive manner with companies and management as opposed to more "active" activist investors who might engage in proxy fights, etc.. It is also interesting to note that Indian company Tractors and Farm Equipment Ltd TAFE, which is AGCO’s supplier in India, accumulated a 8.6% stake. TAFE initially disclosed the purchase of 5.3 million shares in April of 2013, and over the past year increased its holding to 8.1 million shares. The total cost of the acquired shares was $403 million, which means that TAFE paid an average price of $49.8 per share. AGCO Corp, in turn, owns a 23.75% stake in TAFE.

Company profile

AGCO Corporation ( AGCO) is a leading manufacturer and distributor of agricultural equipment and related replacement parts throughout the world. Company sells a full range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, tillage, implements and grain storage and protein production systems. AGCO Corp’s products are widely recognized in the agricultural equipment industry and are marketed under a number of well-known brands, including: Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®. Company distributes most of its products through a combination of approximately 3,100 independent dealers and distributors in more than 140 countries. AGCO Corporation ( AGCO)’s two principal competitors on a worldwide basis are Deere & Company ( DE) and CNH Industrial NV ( CNHI)

Valuation summary

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