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Agco doubles down on South American equipment market

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Tractor maker Agco is attempting to takeover Kepler Weber, a Brazilian manufacturer of grain storage and handling equipment, doubling down on what it sees as the world's most buoyant equipment market.

Agco, the maker of Massey Ferguson and Fendt machinery, struck a binding agreement with the two largest shareholders of Kepler Weber, to purchase 35% of the outstanding shares.

Agco will offer R$22.00 for all outstanding shares of Kepler Weber, with the intention of delisting the company, which its bid values at R$578.9m

Kepler Weber shares rose 15.1% to R$20.15 in morning deals in Sao Paulo.

Resilient farmer market

This week Agco forecast the South American tractor market to revive this year, in contrast to the "market difficulties" in the rest of the world.

Agco forecast industry tractor sales, by vehicle, in South America rising 10% in 2017, after a 6% drop in 2016, compared to falling sales in North America, and a flat market elsewhere.

This forecast tallies with one from rival CNH Industrial, which last week forecast Latin American tractor and combine sales to rise by about a 15% in 2017.

Currency support

Although global grain prices remain depressed, the stronger dollar has supported local currency farm-incomes, with big crops also helping to support budgets.

"The acquisition of Kepler Weber would significantly enhance our market position in the South American grain handling and storage industry," said Martin Richenhagen, Agco's chairman and chief executive officer.

Mr Richenhagen said that the combination "would also provide significant marketing synergies and a leadership position in the South American market as well as further strengthen our capabilities to serve large global customers".

By William Clarke

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