Equipment World Digital Magazine
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president of worldwide construction and forestry for Deere. "There's plenty of news out there today about interest in infrastructure investment, so we believe it's an attractive space for Deere, and the timing is good," he says. "The deal enhances Deere's global presence, with a complementary product line and no product overlap. It makes C&F a global top three player. This deal also provides an opportunity to lever- age the capabilities of our integrated enterprises. You should think about things like electronics, engines, John Deere Finance, etc." Guinn adds that the transportation sector has "growth tailwinds," with an expected compound annual growth rate of 8 percent. "That is not a large increase over the performance of the overall transportation sector over the last decade," he says. "So the trend is not new, but we believe it's increas- ing. It's also important to recognize that road construction consists of not just new roads, but also rehabilitation of existing roads." Synergies As with most purchases such as these, Deere will leverage capabilities of both companies, according to Raj Ka- lathur, senior vice president and CFO for Deere. This ranges from direct and indirect materials from supply base perspective, vertical integration includ- ing engines, cylinders, telematics and electronics, using John Deere Finan- cial to enhance sales prospects, and using WorkSite Solutions to connect machines across the road construction process to enhance productivity. "Over 80 percent of the benefit of these synergies come from cost reduc- tions, largely from direct and indirect materials," Kalathur says. Proximity is playing a role in this synergy strategy as well. In Europe, 30 percent of the Wirgten supply base is common with Deere. Both companies have facilities in Pune, India, and have locations nearby in Brazil and China. Deere isn't expecting to align things on the engine side just yet, according to Guinn. Wirtgen doesn't manufac- ture its own engines but buys them from several manufacturers. "Of course, since we manufacture engines, we do see that as an op- portunity, but we do also recognize that's a very engineering-based change," he says. Distribution network Guinn says it's too early to reveal the strategy for cross-selling the brands internationally, as the company is still reviewing plans. Currently, there are seven Deere dealers in the United States that carry Wirtgen Group equipment. Wirtgen's sales are primarily through company- owned sites, with only 30 percent conducted through 150 independent dealers. Deere owns between 10 and 15 percent of its sales locations in North America, but owns many of its forestry sales sites in Europe. "Their global distribution network is an opportunity for the C&F business, where we've been largely a North American business over history," Guinn says. "The deal does provide scale and provides a global distribu- tions network. It also enhances our ability to serve key customers, many of which we already know and some of which we'd like to know." – Wayne Grayson & Chris Hill July 2017 | EquipmentWorld.com 14 reporter | continued Released during the sale announcement, this graphic shows how the Deere and Wirtgen brands will be integrated on the jobsite to provide a full line of construction and roadbuilding equipment. (Note: Wirtgen crushers and screeners are also part of quarry operations.)