Post Raven Acquisition WorldOne has to think that AGCO is going to be shoping for a new supplier now that CNH has acquired Raven. AJX has to be on the radar. Also interesting to note that both Mahindra and Kubota have been talking far more about autonomous lately and they certainly view Case as a key competitor. The conference call CNH held yesterday really revealed how the Raven acquisition is ALL about offering autonomous and related automated capabilities and that finally NOW is the time the industry has reached its inflexion point.
Kubota has $13.4bn in annual farm equipment revenue, CNH less than that (closer to $11bn), Claas has about EUR4bn, AGCO around $9bn. Outside of CNH the other players are now at risk of falling behind the autonomous technology curve and fewer assets now exist that are acquisition candidates. Topcon and Trimble are likely too expensive and diversified to consider assuming the OEMs just want to add pure play precision ag. expertise. Raven was offered a high EV/S multiple because of the potential for CNH to quickly roll out those products accross it's entire product line and regional focus even though 30% of Raven ag. sales are already to CNH. CNH even mentioned that they modeled losing big customers like AGCO and STILL found the acquisition to make lots of financial and strategic sense. So imagine 70% of Raven ag revenue disappears today, CNH is saying that's ok because that lost revenue can easily be replaced simply by offering Raven products throughout CNH! That is amazing!
Now let's think of the implications in AJX terms: If a Kubota could under its own control roll out AJX products accross it's entire suite of products and regions how much do you think that would be worth? What would that do to sales of AJX as an internal division? Probably generate revenue close to a hundred million AT LEAST with upside I would think, especially if a company like Class with only $4bn in sales did a 12mth bulk order that generated $55mm for AJX. So $100mm potential at least by a 5x multiple on revenue as per what CNH paid sales gets you a $5.00+ stock price for AJX. That's what it would be worth to Kubota, not saying they would pay that much but one never knows. Start throwing in competing bids from Mahindra, Agco, others and suddenly AJX goes for a much higher than expected valuation.