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Non-Tech : New Holland and the Ag Equipment Group
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To: Bob Rudd who wrote (46)1/23/1999 2:11:00 AM
From: James Clarke  Read Replies (1) of 113
 
re: will Caterpillar acquire one of these?

reposted from the Value Investing thread. Thought it might apply here too:

I don't think its at all a longshot that CAT would buy one of the ag companies. I don't think it would be AGCO, though. What CAT needs is distribution. They have a fortress in construction equipment distribution, and they have some excellent high-end ag products. When you see these yellow tractors, they are dazzling. But farmers don't go to construction dealers. A big part of it is location.

AGCO's weakness is its dealers. So I don't think this would fill CAT's needs. A CAT bid on Case would not surprise me, nor would a CAT bid on New Holland. Deere is probably untouchable because I have no doubt management would fight it - they hate CAT and they consider themselves special. For the other two, an acquisition is much more in the cards.
Case - management just wants to make the last buck, whether they make it themselves, or get acquired.
New Holland - Fiat owns the majority of the company, so that is whom CAT would be negotiating with. And I don't think FIAT sells its NH shares for less than $25 - that is the first question I ask NH management every time I meet with them. With the stock at $12, a $25 offer price looks like a non-starter. But if I were CAT, and I thought the fit were right, I would pay something with a 2 in front of it for New Holland.

JJC
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