Deere Looks at Irrigation Division Options

DEAg and construction machinery maker Deere & Co. (NYSE: DE – $84.06) said it’s considering “strategic alternatives” for its precision water-irrigation business that it acquired in 2006. Deere went on to say that no decisions or agreements have been made for John Deere Water, part of the Worldwide Agriculture and Turf Division. San Marcos, CA-based John Deere Water, which provides timed, precision watering to make crop-growing more efficient, has about 1,300 employees, less than 2% percent of Deere’s workforce. Deere wants to focus on higher growth-higher margin aspects of irrigation such as their ‘FarmSight’ strategy that blends machine, GPS and wireless technology to improve productivity and farming resources, than mechanical irrigation equipment. The small division (probably less than 1% of DE’s top line), took at $44 million impairment charge last month as a signal that something may be in the works, including a complete divestiture. Long-term prospects for Deere appear positive. An eventual recovery in global construction markets, the company’s expanding footprint in emerging markets and favorable long-term trends in agriculture, augur well for above average total return potential through late decade.

DE

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