AGCO to Acquire Intersystems - Analyst Blog

The agricultural equipment maker AGCO Corporation AGCO announced that it has agreed to acquire Intersystems Holdings Inc. and subsidiary (Intersystems). This will expand the company's material handling capabilities. Financial terms of the transaction were not disclosed.

Omaha-based Intersystems is a leading manufacturer of commercial material handling solutions. The buyout will help AGCO to expand its grain handling and storage business in the fast growing off-farm segment. Intersystems products are well appreciated by its customers, including feed mills, inland grain terminals and sea port facilities, which will also assist AGCO's growth.

The acquisition is in sync with AGCO's acquisition, expansion and modernization plans and matches perfectly with its GSI brand. AGCO acquired GSI Holding Corp. GSI, a leading manufacturer of grain storage and protein production systems in Nov 2011.

In the first quarter of 2014, GSI sales were up about 10% which aided North America segment sales to rise 3.7% year over year to $647.5 million in the quarter. However, AGCO's total sales decreased 2.9% year over year to $2.33 billion in the quarter.

AGCO reiterated its full-year 2014 earnings per share of approximately $6.00. Net sales guidance has also been maintained in the range of $10.8–$11.0 billion. AGCO is set to benefit from investments in production facilities and higher technology products.

The company projected GSI sales to be up approximately 10% for the full year of 2014 compared with 2013, with most of the growth occurring outside the U.S. In addition, the global population growth and changing trends in diet are generating demand for additional grain storage and protein production capacity facilitating growth in the longer term. However, the political unrest in Ukraine and lower protein sales in the U.S. remain matters of concern for GSI.

Duluth, GA-based AGCO is a global leader in the design, manufacture and distribution of agricultural machinery. It supports productive farming through a wide range of tractors, combines, hay tools, sprayers, forage equipment, tillage, implements, grain storage and protein production systems as well as other related replacement parts.

Currently, AGCO has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include AO Smith Corp. AOS, Columbus McKinnon Corporation CMCO and EnerSys ENS. All these carry a Zacks Rank #2 (Buy).