The maker of John Deere tractors is to buy a German road construction equipment maker as the White House plans to spend $1 trillion on repairing America’s infrastructure.
Deere & Co will pay €4.6 billion (£4 billion) cash to acquire the privately held, family-run Wirtgen Group, which makes milling machines, heavy rollers and other roadlaying machinery.
President Trump’s $1 trillion infrastructure spending plan could result in significant upgrades to US roads, airports and seaports. The plan has stalled, however, as Mr Trump struggles to push healthcare reform and tax cuts through Congress.
Deere & Co did not cite Mr Trump’s infrastructure plan specifically as a reason for the purchase of Wirtgen. However, Max Guinn, president of Deere & Co’s construction and forestry division, said there was “a recognition globally that infrastructure improvements must be a priority, and roads and highways are among the most critical in need of repair and replacement”.
“Spending on road construction and transportation projects has grown at a faster rate than the overall construction industry and tends to be less cyclical,” he added
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Shares in Deere & Co rose by 2.3 per cent to $125.31 in New York yesterday morning.
Sales at Deere & Co’s agricultural machinery business have fallen as farmers in the US produced bumper soybean and corn crops over the past three years. This pushed prices down and left farmers with less money to spend on machinery, which in turn prompted job cuts at Deere & Co.
The company’s agriculture and turf business contributed about 70 per cent to its overall sales of $26.6 billion last year, while construction and forestry accounted for about 20 per cent.
Samuel Allen, chairman and chief executive of Deere & Co, said that the acquisition of Wirtgen would help the company to expand its agriculture business and its construction division. It would also help the company to sell John Deere construction equipment in more markets, he said.
Jürgen Wirtgen, managing director at Wirtgen, said: “We believe this transaction allows the company to be successful well into the future, independent of our family ownership.”
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Deere & Co, which was founded in Illinois by John Deere in 1837, is best known for its green and yellow tractors, which it sells across the world. The company also makes quarrying machinery, such as excavators and loaders, and road laying equipment including earthmovers, bulldozers and motor graders.
Wirtgen makes quarry rock crushers that break rocks into sizes suitable for asphalt and concrete. It makes milling machines that scrape up old road surfaces, compactors to compact graded roads, asphalt pavers to lay hot asphalt and heavy rollers to compact it. The company also makes concrete pavers to construct concrete roads. Wirtgen makes its machinery under five brands: Wirtgen, Vögele, Hamm, Kleeman and Benninghoven.
Deere & Co said that acquiring Wirtgen’s portfolio of quarrying and roadlaying machinery would establish the combined company as an industry leader in road construction.
Wirtgen Group reported sales of €2.6 billion in 2016. It employs 8,000 people and operates in 100 countries.