Ag Growth International Inc T.AFN.DB.J

Primary Symbol: T.AFN Alternate Symbol(s): AGGZF | T.AFN.DB.H | T.AFN.DB.G | T.AFN.DB.I

Industrials

Ag Growth International Inc. is a provider of the equipment and solutions required to support the storage, transport, and processing of food globally. The Company provides equipment solutions for agriculture bulk commodities, including seed, fertilizer, grain, rice, feed, and food processing systems. It has manufacturing facilities in Canada, the United States, Brazil, Italy, France, and India and distributes its products globally. Its segments include Farm and commercial. Its Farm segment focuses on the needs of on-farm customers, and its product offerings include grain, seed, and fertilizer handling equipment; aeration products; grain and fuel storage solutions, and grain management technologies. Its Commercial segment focuses on commercial entities, such as port facility operators, food processors and elevators. Its product offerings include larger diameter grain storage bins and high-capacity grain handling equipment; food and feed handling storage and processing equipment.

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Ag Growth International Inc > RBC

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Post by retiredcfon May 29, 2024 8:45am

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Post# 36061921

RBC

May 28, 2024

AGI (Ag Growth International)
Media reports takeover offer at a 35% premium rejected

TSX: AFN | CAD 46.02 | Outperform | Price Target CAD 80.00

Sentiment: Positive

Our view: We anticipate a positive reaction from AGI shares to an unconfirmed report from The Globe and Mail of a takeover offer at a >35% premium to the current price as it underscores the potential value in AGI. However, we view the reported bid as opportunistic given shares have traded off ~25% since Q1 results. In our view, the recent sell off based on potential near-term demand headwinds and delivery timing was overdone, missing both the fundamental improvements in underlying operations and long-term growth potential.

We maintain our view that shares are significantly undervalued at 6x 2024E EV/EBITDA compared to the historical average at 8x and peers at 9x (which reflects a wider gap to peers), with potential to re-rate higher on long-term sales growth, improved margins, rising cash generation, and de-leveraging.

Summary: The Globe and Mail reported in an unsubstantiated article that the AGI board has rejected an unsolicited takeover offer from an industrial peer at a >35% premium to the current price, implying an offer price of >C$62/sh. The reported offer values AGI at 7.1x 2024E EBITDA, compared to 6.0x currently, the historical average of ~8x and publicly-traded ag equipment peers at ~9.5x. The article was based on unnamed source and did not name the potential acquirer.