AGCO and tractor manufacturer Tractors and Farm Equipment (TAFE) from India have been into a long-lasting commercial relationship. Earlier this year however, AGCO opened its own subsidiary in India, deciding TAFE to go into litigation with AGCO. As a result, AGCO issued the statement below, commenting on this matter.
“AGCO maintains an open dialogue with all stockholders and welcomes constructive input toward the shared goal of maximizing stockholder value. The Board of Directors is committed to acting in the best interests of all AGCO stockholders and will continue to take actions to deliver returns on their behalf. To that end, AGCO regularly engages with TAFE, whose Chairman and Managing Director, Mallika Srinivasan, serves as a non-independent director of AGCO.
As part of the company’s continuing review of its business and operations, the company filed notice of termination of certain commercial agreements with TAFE in April 2024. This decision followed extensive discussions with TAFE over multiple years concerning TAFE’s continued poor operational performance as a supplier, brand licensee and distributor to AGCO, as well as TAFE’s continued lack of focus on AGCO customers in several key markets.
These discussions were held at multiple levels of the organization, including with Ms. Srinivasan over the past several years. Despite assurances from TAFE that these issues would be addressed, there continued to be a lack of meaningful progress. As a result of the termination notices, TAFE subsequently commenced litigation against AGCO in India, which remains ongoing today.
AGCO and TAFE have always treated the commercial and business relationship as separate from the TAFE investment in AGCO and its representation on AGCO’s Board. TAFE agreed to renew the limited standstill agreement with AGCO without conditioning it on the continuation of the commercial agreements, as it has always done since 2014 and notwithstanding the ongoing commercial issues being discussed.
It is disappointing that it appears that TAFE has now chosen to respond to a commercial decision by threatening the use of the consent solicitation process in an attempt to pressure AGCO. AGCO’s Board and management team remain focused on executing its Farmer-First strategy to drive continued value creation for all its stockholders. Replacing AGCO’s independent directors with TAFE’s hand-picked nominees would serve only to assist in prioritizing the interests of TAFE and its operations above the interests of AGCO’s other stockholders.
AGCO’s Board is comprised of directors with diverse skills and experiences that are highly relevant to the business needs and current strategy. Over the last five years, AGCO has refreshed its Board with five new independent directors, each bringing select, complementary skillsets. Additionally, AGCO has significantly enhanced its governance practices, including adopting term limits for the lead director and committee chairs, strengthening lead director duties, and increasing the share ownership requirements for its directors and CEO.
The Board works closely with Chairman, President & CEO Eric Hansotia, who has pioneered AGCO’s Farmer-First strategy – a strategy the Board remains confident will maximize long-term value creation for stockholders.
Given the current agricultural equipment environment, AGCO is taking aggressive actions, including the recently announced restructuring program, to control expenses, reduce production levels and lower investments in working capital. Also, the company is balancing these near-term cost reductions with continued investment in longer-term, high-margin growth initiatives designed to deliver more sustainable results through economic cycles. AGCO is committed to maintaining a constructive dialogue with all stockholders and will listen carefully to their perspectives.”
