Market Movers Ag Growth International Inc. soared after the Globe’s Andrew Willis reported it recently rebuffed an unsolicited takeover offer made in the wake of a slide in the Winnipeg-based farm equipment manufacturer’s share price, a sign of the challenges facing a mid-sized player in an agricultural sector dominated by far larger companies.
The board at Ag Growth International, branded as AGI, turned down a bid from an industry rival priced at a 35-per-cent-plus premium to where the company’s stock is trading, according to a source familiar with the process. The source declined to name the potential buyer, and The Globe and Mail is not naming the source because they were not authorized to speak for the company.
An AGI spokesperson had no comment on reports of offers for the company, which sold $1.5-billion worth of crop and fertilizer processing, handling and storage equipment last year.
AGI, which has an $877-million market capitalization, is a target for deeper-pocketed rivals after a drop in its stock price left it valued at a significant discount to peers in the farm equipment industry, according to investment bankers and analysts.
AGI’s stock price has fallen 25 per cent since the company announced weaker-than-expected financial results on April 29. In a report, analyst Tim Monachello at ATB Capital Markets said investors are concerned the industry is heading for a cyclical downturn, with U.S. farmers spending less than expected on equipment. He said the stock price also fell on concerns AGI could face delays on major commercial projects.
In a research report released Wednesday morning, National Bank Financial analyst Maxim Sytchev said: “For us, we believe selling now at $62/sh would not be in the best interest of long-term shareholders.”
“Ag cycle is one of the most depressed parts of the market now; buying into the likely bottom makes sense to us. While the everything rally continues, the ag cycle has been left in the dust. We believe we are closer to the bottom here, creating an interesting / compelling risk / reward skew for the sector and AFN in particular. We reiterate Outperform rating and $77 target price.”