Breaking News: July 2001, John Deere Seals Deal Of The Century

MOLINE, Ill. - When John Deere bought McGinnis Farms earlier this year, the company was clear about its intentions. "[McGinnis Farms] had visions for substantial growth, and we don’t see John Deere changing that vision," confirmed Dave Werning, now the president of McGinnis Farms, which has been renamed John Deere Landscapes.

The announcement that John Deere reached a deal to acquire the parent company of Century Rain Aid, Madison Heights, Mich., confirmed a widespread industry rumor and immediately put this new organization at the front of the irrigation industry. John Deere Landscapes added approximately 165 locations and $210 million in estimated annual sales to the $150 million in annual sales and 40 locations John Deere acquired when it bought McGinnis Farms.

"With the planned creation of John Deere Landscapes, we will provide total solutions to landscape and irrigation professionals," related John Jenkins, president of John Deere’s Worldwide Commercial and Consumer Equipment Division. "In addition to expanding our ability to serve irrigation customers, Century brings us more than 160 new locations and a strong team of people."

THE DEAL. John Deere is actually acquiring Richton International, the parent company of Century Rain Aid. Richton had 2000 annual revenue of about $260 million, with its irrigation distribution division accounting for about 80 percent of those dollars. In addition, Richton owned CBE Technologies and Creative Business Concepts – two firms focused on computer services and products that John Deere likely will sell off.

John Deere agreed to pay $125 million for Richton and assume $45 million in debt. Richton stockholders will be paid $36.13 per share of stock or will trade their stock for .8415 shares of John Deere stock. Richton stock closed at $29 per share the day before the deal was announced, which is double its price one year ago.

The acquisition remains subject to Richton stockholder approval.

INDUSTRY REACTION. Members of the irrigation industry had a range of thoughts following the announcement, and most feedback was optimistic, seeing the deal as a positive for the industry. "This is a culmination of the industry continuing to mature," noted Brian Day, vice president, marketing for Bamboo Pipeline, Santa Barbara, Calif., and a 13-year employee of Century Rain Aid until last summer. "Companies like John Deere will continue to bring more professionalism and credibility to an industry that can use it, and that’s a real positive."

"I don’t see a downside to this deal at this point, and I don’t know what one even could be unless someone is afraid this is an attempt by one organization to monopolize the market," noted Brian Vinchesi, president, Irrigation Consulting & Engineering, Peppermill, Mass. "While I don’t think John Deere is done buying yet, this would be a difficult market to monopolize."

From a supplier side, the acquisition could present growth opportunities, noted Jeff Carowitz, vice president of marketing, Hunter Industries, San Marcos, Calif. "As a supplier you never know what will happen with deals like this, but we feel that the management team on all sides of this new organization is very strong," he related. "We believe there’s a lot of growth potential for the industry, be it in irrigation, landscape lighting, water features or installation. Now we’re looking at a big company with good product lines and resources coming into this industry, and I see John Deere as a company that can help contractors grow their businesses."

With more than 200 locations in the organization, John Deere Landscapes is the country’s first national distributor, although there are still areas to fill in. McGinnis Farms was located in 10 states, from the Carolinas through Texas, based on the various acquisitions it had made before selling to John Deere. Century Rain Aid’s extensive buying spree has given it a presence in almost 40 states, although the company just entered Texas and California with acquisitions in recent months.