Deere Exploring ‘Alternatives’ for Water Irrigation Unit
Deere & Co. (DE) said it’s considering strategic alternatives for the precision water-irrigation business it moved into with the 2006 purchase of Roberts Irrigation Products Inc.
The world’s largest farm-equipment maker said today in a statement that no decisions or agreements have been made for John Deere Water, part of the Worldwide Agriculture and Turf Division. The Moline, Illinois-based company hired Bank of America Corp. as exclusive financial adviser.
“To look to strategic options is not a surprise,” William Blair analyst Lawrence De Maria said in an interview. “They are more interested in the total farm controls through their ‘FarmSight’ marketing strategy than the actual systems.”
Other company leaders for a global sprinkler irrigation system market estimated to reach $2.4 billion by 2016 include Israel’s Netafim Inc., Jain Irrigation Systems Ltd. of India and Toro Co. in the U.S.
While Deere doesn’t break out the unit’s results, some analysts including Wells Fargo & Co.’s Andrew Casey estimate annual sales at less than $250 million, or below 1 percent of total revenue. Both Casey and De Maria rate Deere “underperform.”
Deere’s possible sale comes as Glencore International Plc and Bunge Ltd. (BG) in April both said they expected more merger and acquisition activity. Water companies such as Xylem Inc. have also been making purchases.
John Deere Water, which provides timed, precision watering to make crop-growing more efficient, has about 1,300 employees, spokesman Ken Golden said. That’s about 1.9 percent of Deere’s workforce based on total employees at the end of fiscal 2012.
Last month, Deere took a $44 million impairment charge related to assets in the division.
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