Linamar Corp. (TSX:LNR) today announced that it has entered into a definitive agreement to acquire 100% of the outstanding equity interests of MacDon and its Group of Companies for an aggregate purchase price of C$1,200 Million, less the assumption of small transaction related expenses, and subject to certain customary adjustments (the “Transaction”). Headquartered in Winnipeg, Manitoba, Canada, MacDon is a global innovative market leader in the design and manufacturing of specialized agriculture harvesting equipment such as drapers and self-propelled windrowers.
MacDon is an industry-leading manufacturer with a strong customer following and advanced agriculture equipment technologies. It has developed an industry-leading reputation for quality, reliability and passion for harvesting technology over its 67 year history as a family owned company. MacDon’s mission is to manufacture reliable machines that make harvesting easier and more productive for its customers in over 40 countries worldwide. MacDon’s products excel in the toughest real-world conditions, and its pioneering, industry-leading innovations like the FlexDraper have propelled the company’s strong reputation for providing customers with quality, innovative equipment. Further, MacDon has developed strong relationships with a global dealer network of approximately 1,400 leading dealers and distributors, a major competitive advantage in the industry. Linamar sees a compelling cultural fit with MacDon given its strong family legacy and looks forward to building on that foundation, which has been a key driver of MacDon’s success. This platform acquisition positions Linamar as a leading global agricultural equipment manufacturer.
In a letter to its dealers, MacDon management said:
This is a friendly transaction between two companies that started their relationship in 2007 with an agreement to manufacture our combine pick-up header in their Hungarian facility. Linamar is acquiring MacDon because MacDon is successful and Linamar has a deep understanding of the ingredients of that success; first and foremost our people. This transaction makes sense as it will combine one of the finest automotive parts suppliers in the world with a proven leader in the design and manufacture of high-performance harvesting equipment. MacDon is a critical piece of Linamar’s long-term growth strategy to diversify into segments outside of the automotive market and be part of the key Agriculture/Food sector. MacDon will be the centrepiece of the Linamar Agriculture Business Unit and combined with their Oros Division, that manufactures and designs corn and sunflower harvesting equipment, will position both companies for global growth. Linamar’s plan is to grow their Agricultural platform through expansion of product offerings and increasing penetration in both new and underserved markets globally.
Perhaps most importantly, MacDon and Linamar share important values. Linamar is a company with a strong family-run legacy with deep Canadian roots, similar to MacDon. We both focus on safety as the most important aspect of our work and share a deep respect for people and the talent and commitment you demonstrate each day. An important part of this transaction is that MacDon will continue to be led by Gary Giesbrecht and current Management.
MacDon will be combined with Linamar’s existing agriculture harvesting business in Hungary to position both businesses for significant growth. Linamar’s existing harvesting business is highly complementary to MacDon product plan allowing Linamar to offer a full lineup of grain and hay harvesting equipment. Linamar plans to expand its agricultural platform by increasing penetration in both new and under-serviced markets globally. Linamar expects to realize modest synergies from the Transaction and create opportunities to utilize existing distribution channels for agricultural products. The Transaction is expected to be immediately accretive to earnings per share and free cash flow per share even before accounting for these synergies. As it expands, MacDon will benefit from Linamar’s established manufacturing footprint in Asia and Europe along with employing best practices from both Linamar and MacDon.
Linamar has a long track record of executing strategic, accretive acquisitions followed by seamless integration. Its previous acquisitions of Skyjack, Montupet and Seissenschmidt are compelling case studies of Linamar building its global manufacturing platform with broader product lines, additional capabilities in new markets and incremental geographic presence, while continuing to deliver outstanding financial performance and returns to its shareholders.
“The acquisition of MacDon provides a truly once-in-a-lifetime opportunity to move our agriculture business into a market leading position while providing meaningful diversification to the end markets we serve. We believe the long-term growth fundamentals for the agriculture industry are very strong given the growing and developing global population, noting the market is in the early stages of cyclical recovery.” said Linda Hasenfratz, Linamar’s CEO, “MacDon is a strong, well-managed company and an innovative market leader in both customer penetration and technology evolution; it will be the centerpiece of our agriculture business, which includes our existing European corn header business, highly complementary to MacDon products. We get diversification, innovation, growth and a solid deal, we couldn’t be happier.