CNH Industrial N.V. today said it has agreed to acquire 100% of the capital stock of Raven Industries Inc. at $58 (U.S.) per share, representing a 33.6% premium to the precision agriculture company's four-week volume-weighted average stock price and $2.1 billion enterprise value. CNH Industrial said it is paying for the transaction with available cash on hand. The companies said they expect the deal to close in the fourth quarter of 2021, subject to the satisfaction of customary closing conditions, including approval of Raven shareholders, and receipt of regulatory approvals.
The acquisition builds upon a long partnership between London-based CNH Industrial and Sioux Falls, S.D.-based Raven Industries. The companies said it will enhance CNH’s position in the global agriculture equipment market by adding strong innovation capabilities in autonomous systems and precision agriculture.
“Precision agriculture and autonomy are critical components of our strategy to help our agricultural customers reach the next level of productivity and to unlock the true potential of their operations,” stated Scott Wine, CEO of CNH Industrial. “Raven has been a pioneer in precision agriculture for decades, and their deep product experience, customer-driven software expertise, and engineering acumen offer a significant boost to our capabilities.”
“This acquisition emphasizes our commitment to enhance our precision farming portfolio and aligns with our digital transformation strategy,” he added. “The combination of Raven’s technologies and CNH Industrial’s strong current and new product portfolio will provide our customers with novel, connected technologies, allowing them to be more productive and efficient.”
CHN Industrial to review units
CNH Industrial said it is a global leader in the capital goods sector with established industrial experience, a wide range of products, and a worldwide presence. It has developed methane-powered and autonomous tractor concept vehicles.
The company's industrial brands include Case IH, New Holland Agriculture, and Steyr for tractors and agricultural machinery; Case and New Holland Construction for earth-moving equipment; and Iveco for commercial vehicles. They also include Iveco Bus and Heuliez Bus for buses and coaches; Iveco Astra for quarry and construction vehicles, Magirus for firefighting vehicles, Iveco Defence Vehicles for defense, and FPT Industrial for engines and transmissions.
Raven Industries has three business divisions: Applied Technology for precision agriculture, Engineered Films for high-performance specialty films, and Aerostar for aerospace. The company has developed autonomous systems for areas such as farming, defense, and scientific research. It had consolidated net sales of $348.4 million for the 12 months that ended on Jan. 31, 2021. Raven Industries also said it is a global technology partner for OEMs, agriculture retailers, and dealers.
The Engineered Films and Aerostar segments are industry leaders in the high-performance specialty films and stratospheric platform industries, respectively, said CNH Industrial. They represent attractive independent businesses with excellent near and long-term potential, said the company, which plans to undertake a strategic review of each business to best position them for future success and maximize shareholder value.
“For 65 years, our company has been committed to solving great challenges,” said Dan Rykhus, president and CEO for Raven Industries. “Part of that commitment includes delivering groundbreaking innovation by developing and investing in our core capabilities and technology. By coming together with CNH Industrial, we believe we will further accelerate that path, as well as bring tremendous opportunities and value to our customers — once again fulfilling our purpose to solve great challenges.”
“Our relationship with CNH Industrial has expanded over decades, and we have a deep respect for one another and a shared commitment to transform agriculture practices across the world,” he added. “We look forward to CNH Industrial leveraging the Raven talent and culture, as well as the Sioux Falls community, as part of their vision and future success.”
Raven Industries to grow revenue from synergies
CNH Industrial said it expects its acquisition of Raven Industries to generate about $400 million in run-rate revenue synergies by calendar year 2025, resulting in $150 million of incremental EBITDA (earnings before interest, taxes, depreciation, and amortization) from synergies.
“Raven Industries’ capabilities, innovation culture, entrepreneurial spirit and engineering talent are impressive and will continue to thrive as part of the CNH Industrial family,” said Wine. “We are incredibly excited to collaborate in bringing our customers more integrated precision and autonomous solutions, not only to improve productivity and profitability, but also promote more sustainable solutions and environmental stewardship.”
“Together, our teams will create a stronger business for our employees, dealer network, and customers, enabling us to shape the future of agriculture, augment our world-leading sustainability credentials, and maximize our growth opportunities,” he said.
The company said it does not expect the proposed acquisition to have any impact on its guidance for 2021. It expects the acquisition to be funded with group consolidated cash not affecting third-party debt of industrial activities. Cash consideration for the transaction is not included in the free cash-flow definition, and consequently, it will not affect its free cash flow guidance for the FY 2021E, said CNH.
Barclays and Goldman Sachs acted as financial advisors to CNH Industrial, and Sullivan & Cromwell LLP as its legal advisor. J.P. Morgan Securities LLC acted as financial advisor to Raven, and Davis Polk & Wardwell LLP as its legal advisor.
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