Thursday, agricultural equipment maker AGCO Corp. (AG) said it agreed with Russian industrial machinery builder, Concern Tractor Plants, to set up a joint venture company in Russia for the assembly of diesel engines.
As per the joint venture deal, AGCO and Concern Tractor Plants, or CTP, will both have a 50% ownership in the new company, in which AGCO plans to make an investment of $9 million over the next three years.
The JV company will be responsible for the assembly and distribution of the full range of AGCO SISU POWER engines throughout Russia and commonwealth of independent states, or CIS, countries. The facility, which will be based in one of CTP's existing plants in Vladimir near Moscow, is anticipated having an initial capacity of up to 20,000 engines per year. The first batch of engines is expected to be produced before the end of this year.
AGCO said the JV company will become the key engine supplier for all major CTP plants manufacturing both industrial and agricultural machinery between 50HP and 350HP, other than selling engines to third party customers mainly in the CIS countries.
While AGCO contribute its engine technology and manufacturing know-how, CTP will bestow the knowledge of the Russian market and a strong position in the market.
Commenting on the partnership, Michael Bolotin, president of CTP said, "... AGCO will gain access to a major new market for diesel engines in Russia and CIS, and CTP's companies, as well as other Russian and CIS companies, will obtain the opportunity to install modern, clean, fuel efficient engines in their machinery."
The current deal is in conjunction with an order from CTP for 750 AGCO SISU POWER engines manufactured in AGCO's Linnavuori, Finland manufacturing facility. This will be delivered during 2008 for the initial installation and development program.
AG closed Wednesday's trading at $32.72, up $1.26 or 4.01%, on a volume of 3.75 million shares.
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