CNH Industrial’s $2.1bn Acquisition of Raven Industries

By Abilash Prabhakaran (MIT)

 

Overview of the deal


Acquirer: CNH Industrial

Target: Raven Industries

Implied Equity Value: $2.08 billion

Total Transaction Size: $2.14 billion

Closed date: Q4 2021

Acquirer advisors: Goldman Sachs, Barclays

Target advisor: JP Morgan


Raven Industries has been a market leader in precision agriculture due to its advanced product expertise and software tools. As CNH hopes to expand into the precision agriculture market, which has strongly grown through a recently unprecedented focus on ESG, CNH can expect to better deliver efficient farming solutions to its customers. The deal is expected to generate $400 million in revenue synergies and $150 million in increased EBITDA by 2025. One major advantage is that CNH and Raven have had a strong partnership; thus these transactions help CNH consolidate and better capture the precision agricultural market. Competitively, Raven’s expertise can help improve CNH’s precision agriculture business’s operating margin to be more in line with competitors. Currently, CNH’s agricultural division has reported an operating margin of 13.1%, while competitors like John Deere have reported operating margins of 21.7% for their precision agriculture division. Bringing in the leadership from Raven industries can help CNH drive operational excellence and potentially establish better operational standards.


“Precision agriculture and autonomy are critical components of our strategy to help our agricultural customers reach the next level of productivity and to unlock the true potential of their operations.” - Scott Wine, CEO of CNH Industrial.

Company Details: (Acquirer - CNH Industrial)


CNH Industrial (NYSE: CNHI) is a global capital goods provider to industrial companies. CNH provides machinery for agriculture, earthmoving, busing, quarry and construction, firefighting, defence, engines, and transmission.


Founded in 2012, headquartered in Amsterdam, Netherlands

CEO: Scott Wine

Number of employees: 63,000

Market Cap: $22.4 billion (as of 10/07/2021)

EV: $38.8 billion

LTM Revenue: $28.0 billion

LTM EBITDA: $1.9 billion

LTM EV/Revenue: 1.4

LTM EV/EBITDA: 20.4


Company Details: (Target - Raven Industries)


Raven Industries (NASDAQ: RAVN) is the leader in precision agriculture, high-performance speciality films, and aerospace and defence solutions. The company is underpinned by innovative autonomous systems that are critical in agriculture, national defence, and scientific research.


Founded in 1956, headquartered in Sioux Falls, South Dakota, USA

CEO: Dan Rykhus

Number of employees: 1,300

Market Cap: $1.4 billion (as of 18/06/2021)

EV: $1.33 billion

LTM Revenue: $374.4 million

LTM EBITDA: $37.1 million

LTM EV/Revenue: 3.6

LTM EV/EBITDA: 35.8


Projections and Assumptions

Short-term consequences


This deal is accretive because it was completely financed with cash and because Raven is profitable, which would increase CNH