It's buying German road-builder Wirtgen to beef up its construction arm

By Geoffrey Smith
June 1, 2017

Deere & Co de , the company best known as the U.S.’s biggest supplier of farm machinery, is bolstering its construction business with a $5 billion acquisition in Germany.

Moline, Illinois-based Deere said it’s buying privately-held road construction company Wirtgen Group for $5.2 billion in cash, a figure that includes the German company’s debt.

Read: Trump Administration: President’s $1 Trillion Infrastructure Plan Is Coming in a Few Weeks

Wirtgen makes equipment used in laying roads and has a network of company-owned and independent dealers in about 100 countries. It’s the company behind the Vögele, Hamm and Kleemann brands, and it does around 20% of its business in the U.S.. Wirtgen said in its press release that Deere intends to keep all of those brands going, and maintain “management, manufacturing footprint, employees and distribution network,” which suggests that job cuts among Wirtgen’s 8,000-strong workforce will be kept to a minimum. The deal is expected to close in the first quarter of 2018.

The deal comes against a background of high expectations for the infrastructure program of the new administration. President Donald Trump had made fixing the country’s roads a signature promise of his 2016 election campaign, and also of his inauguration speech. Max Guinn, head of Deere’s construction and forestry division, said “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.”

Read: Trump’s “Shovel Ready” Infrastructure Plan Frustrated By Delays

Transportation Secretary Elaine Chao promised in March that the administration would present a $1 trillion infrastructure program later this year, but actually pushing it through will depend on funding. That’s proving hard to nail down due to the slow progress of Trump’s plans to reform health care and corporate taxation.

Read: Warren Buffett Just Quietly Bought Up Another German Company

 

The deal makes Wirtgen the latest member of Germany’s famed Mittelstand of medium-sized, family-owned companies – concentrated largely in the manufacturing sector – to sell out to a larger strategic buyer. The group is currently run by Stefan and Jürgen Wirtgen, sons of the late founder Reinhard. They had fielded interest from more than one interested party over the last couple of years, but chose Deere “because the businesses of Deere and Wirtgen complement each other so well,” a Wirtgen spokesman said.

 

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