Deere acquires Wirtgen to build global construction equipment powerhouse

Deere & Company, the entity behind the famous John Deere brand, has acquired German construction equipment manufacturer, Wirtgen Group, in a surprise €4.35 billion (A$6.48 billion) deal.

While the purchase price for the equity is valued at €4.35 billion – paid for in an all-cash transaction – the total transaction value including net debt and other considerations is estimated to be close to €4.6 billion (A$6.84 billion), Deere revealed – adding the acquisition is meant to establish the brand as the industry leader in global road construction.

“The acquisition of the Wirtgen Group aligns with our long-term strategy to expand in both of John Deere’s global growth businesses of agriculture and construction,” commented Samuel Allen, Chairman and CEO of Deere & Company.

“Wirtgen’s superb reputation, strong customer relationships and demonstrated financial performance are attractive as we expand the reach of John Deere construction equipment to more customers, markets, and geographies.”

Max Guinn, President of Deere’s Worldwide Construction & Forestry Division, added, “This transaction enhances our global distribution options in construction equipment and enhances our capabilities in emerging markets.

“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.”

Headquartered in Germany, the Wirtgen Group has five premium brands across the entire road construction sector spanning milling, processing, mixing, paving, compaction and rehabilitation, with combined sales of €2.6 billion (A$3.9 billion) in 2016.

Managing Director Stefan Wirtgen, said, “The Wirtgen Group has a legacy of technology and innovation with market-leading products and a strong focus on the customer. 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.”

Fellow Managing Director, Jürgen Wirtgen, added, “Our company’s strength and success comes from dedicated employees who are focused on helping customers succeed in the road construction industry. We believe this transaction allows the company to be successful well into the future – independent of our family ownership.”

Deere plans to maintain the Wirtgen Group’s existing brands, management, manufacturing footprint, employees and distribution network. However, the combined business is expected to benefit from sharing best practices in distribution, customer support, manufacturing and technology as well as in scale and efficiency of operations.

The local Wirtgen operation in Australia has confirmed that, in line with Deere’s announcement, there will be no changes for Australian customers. However, Greg Astill – General Manager of Mineral Technologies – and Stuart Torpy – General Manager of Road Technologies – are assuming the roles of Joint Managing Directors, while CEO, Paul Hockridge, will leave the company.

The transaction is subject to regulatory approval in several jurisdictions as well as certain other customary closing conditions. The companies said they expect to close on the transaction in the first quarter of Deere’s 2018 fiscal year.