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.