Dive Brief:
- CNH Industrial N.V. has agreed to sell a 70% stake in its construction equipment business to Kobelco Construction Machinery Co. for $700 million in cash and form a joint venture with the company.
- The move would pave the way for a full divestment of CNH’s construction equipment business, currently valued at $1 billion, as the company focuses more on agricultural equipment during a market slump.
- CNH said it plans to pay down debt with the net proceeds and retain a 30% stake in the joint venture to ensure a smooth business transition. Leadership is aiming to close the deal by the end of 2027.
Dive Insight:
The transaction is the latest step in CNH’s multiyear strategy to simplify its portfolio and become a “pure-play” agriculture equipment, technology and services company.
CEO Gerrit Marx mentioned in a February earnings call that CNH had restarted talks with potential partners regarding its construction equipment business.
The company evaluated several buyers and strategies for the division, before settling on Japan-based Kobelco. It sought a partner that could scale its construction equipment business’ geographic reach, deepen its technology offerings and steward its existing Case, New Holland and Eurocomach brands, Marx said in a third quarter earnings call Monday.
The joint venture will create a “better-resourced and focused business with the ability to be more competitive, innovative and agile in the construction industry,” he said.
As part of the agreement, there is a three-year lock-up period that prevents the companies from selling, transferring or divesting their shares in the venture. After that period, CNH will have a 30% equity holding and the ability to eventually transfer full ownership of the business to Kobelco, Marx said.
The deal, if approved by regulators, would combine CNH’s construction equipment brands, products, sales, service network and customer base with Kobelco’s portfolio of hydraulic excavators, cranes and digital services. It also would combine both of their geographic footprints.
The companies chose Humayun Chishti, president of CNH’s construction segment, to lead the joint venture as CEO after the deal closes.
“Leveraging Kobelco's complementary strengths, geographies, innovation and expertise, Humayun Chishti and his team will have the focus and the resources to build more competitive machines and deliver outstanding support to customers and dealers,” Marx said in a earnings call.
This is not CNH’s first partnership with Kobelco. They previously established a global excavator alliance and joint venture in 2002 before terminating it 10 years later.
The partners are moving forward with the deal during a construction boom fueled partially by data center expansion projects that support the growth of artificial intelligence.
CNH’s construction business generated $777 million in net sales, up 5% from a year ago, during the latest quarter that ended Sept. 30. Meanwhile, the company’s agriculture business saw sales decline 2% to $2.9 billion over the same period. CNH made a net profit of $35 million across its operations and services.
CNH said it expects the sale to be accretive to the company’s margins and allow it to focus entirely on growing its agriculture business. CNH began to tighten its operational scope with the acquisition of precision agriculture technology maker Raven Industries in 2021. The following year it shed its on-highway commercial vehicles business through the spin-off of Iveco Group.
CNH is controlled by Italy’s Agnelli family, whose fortune can be traced back to Fiat co-founder Giovanni Agnelli. They also have significant equity ownership in Stellantis, Ferrari, the Economist Group and other ventures through investment firm Exor.
