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TAFE settles AGCO dispute, retains Massey Ferguson brand in India
As part of the deal, TAFE will buy back AGCO's shares in TAFE, which amount to 20.7 per cent of TAFE's equity, for a consideration of $260 million, thereby making TAFE a wholly owned subsidiary of the Amalgamations Group, a diversified industrial conglomerate headquartered in Chennai.
On the other hand, the Indian major has agreed to retain its shareholding in AGCO at an ownership level of 16.3 per cent, and not exceed it, while participating in AGCO's future buyback programmes to maintain its proportionate ownership subject to certain exceptions. TAFE is the single largest shareholder in AGCO, the third-largest farm equipment manufacturer in the world after Deere & Company and CNH Industrial. On the other hand, AGCO holds 21 per cent of TAFE.
TAFE will remain a long-term investor in AGCO through planned periodic interactions with AGCO leadership. While all commercial agreements between TAFE and AGCO will be mutually terminated, TAFE said it will honour outstanding supply orders and continue to supply parts for all markets on agreed terms. All ongoing legal proceedings will be irrevocably and unconditionally withdrawn.
'As we step into a new era in TAFE's growth story, we recognise and cherish the long partnership we've had with AGCO, and continue to support AGCO as an engaged shareholder,' said Mallika Srinivasan, Chairman and Managing Director, TAFE.
'We are pleased to have reached an amicable resolution with TAFE on all outstanding commercial, governance and shareholding matters,' said Eric Hansotia, AGCO's Chairman, President and Chief Executive Officer. The agreements will become effective upon the completion by AGCO and TAFE of certain governmental and other processes in India relating to the repurchase of the shares held by AGCO in TAFE.
'TAFE and Massey Ferguson have been synonymous in the minds of the Indian customers for over 65 years. We re-dedicate our commitment to transformation of Indian agriculture through our innovative products, solutions and service to the farming community in India. As we move towards our vision of 'Cultivating the World', we are confident of delivering exceptional value to all our stakeholders,' Srinivasan added.
The brand is crucial for TAFE, as out of its total annual production of over 180,000 tractors, over 100,000 are Massey Ferguson. Since its inception in 1960, TAFE has produced, built and nurtured the Massey Ferguson brand in India with over 3 million customers.
'We appreciate the TAFE relationship for its years as a commercial partner and continued support as a shareholder. AGCO's board and management team are fully focused on our Farmer-First strategy, which we believe will improve outcomes for farmers, drive operational success for our company and deliver strong returns for shareholders,' Hansotia said.
TAFE has agreed to customary provisions governing its shareholding in AGCO, including voting its shares in accordance with the recommendations of AGCO's Board of Directors on all proposals at AGCO's shareholder meetings, subject to certain agreed limited exceptions," an AGCO statement said.
"Parties have agreed to mutual non-disparagement and TAFE not engaging in public activism. TAFE will no longer be entitled to nominate a representative to the AGCO Board of Directors and AGCO's Director on TAFE's Board will step down," it said.
AGCO first announced the termination of its agreements with TAFE, including the brand licence for Massey Ferguson, in April, which kicked off a legal battle. On 19 November, both TAFE and AGCO claimed that the Madras High Court had favoured them in their dispute over Massey Ferguson, citing an order to maintain the 'status quo,' leading to confusion. The High Court in February had ordered both the companies to maintain the status quo.
The journey of Massey Ferguson started in India in the 1960s when Chennai-based Amalgamations Group decided to manufacture these tractors in India. TAFE was founded as a joint venture between Massey Ferguson, a part of the AGCO Group, and Amalgamations in 1960. It was only in 1974 that the two companies first entered into a trademark agreement for limited tractors. This deal was further expanded in 1994, granting TAFE the exclusive right to use the Massey Ferguson (MF) brand name for its tractor operations in India.
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