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DEERE & CO 8-K Report, Material Agreement (Aug 19, 2021)

Filed August 19, 2021For Securities:DE

Summary

Deere & Company (DE) has announced the dissolution of its long-standing joint venture with Hitachi Construction Machinery Co., Ltd., which focused on the manufacturing and distribution of excavators in the Americas. This agreement, effective August 19, 2021, and expected to close in the first half of fiscal year 2022, will see Deere acquire Hitachi's stake in the joint venture entities, obtaining full ownership and specific intellectual property rights. The company expects to fund the initial cash consideration of $275 million, net of acquired cash and intercompany settlements, from existing cash reserves. Following the termination, excavators manufactured under the joint venture will be solely branded as John Deere. Deere will enter into a new, long-term supply agreement with Hitachi for certain components and service parts. This strategic move allows Deere to gain greater control over its excavator business in the Americas and consolidate its brand presence, while Hitachi will assume distribution of Hitachi-branded excavators and its mining product line. Investors should monitor the integration process and the impact on market share and profitability in the excavator segment.

Key Highlights

  • 1Deere & Company (DE) is dissolving its 1988 joint venture with Hitachi Construction Machinery Co., Ltd. concerning excavators in the Americas.
  • 2The dissolution agreement, signed August 19, 2021, is expected to close in the first half of fiscal year 2022.
  • 3Deere will acquire Hitachi's shares in the joint venture entities and certain intellectual property rights.
  • 4Deere will purchase the shares for an initial cash consideration of $275 million, subject to adjustments for acquired cash and intercompany balances.
  • 5Post-dissolution, excavators from the joint venture's manufacturing locations will be sold exclusively under the John Deere brand.
  • 6Deere will enter into a long-term supply agreement (5-30 years) with Hitachi for John Deere-branded excavators, components, and service parts.
  • 7Hitachi will assume distribution of Hitachi-branded excavators and the mining product line.

Frequently Asked Questions

The main impact is that Deere will gain full control over its excavator business in the Americas, consolidating the John Deere brand presence. It will also acquire certain intellectual property rights and enter into a new supply agreement with Hitachi.

Deere will pay an initial cash consideration of $275 million, net of acquired cash and settlement of intercompany balances. The company expects to fund this from cash on hand. Deere will also assume substantially all liabilities and debt of the joint venture entities.

The termination is expected to close during the first half of fiscal year 2022, pending regulatory approvals and other customary closing conditions.

These facilities will continue to manufacture John Deere-branded excavators. Deere will continue to manufacture 10-50 metric ton John Deere-branded excavators, and will purchase other John Deere-branded excavators, components, and service parts from Hitachi under a new supply agreement.